If there were ever to be a "cheaper" iPhone model, it'll be feature equivalent (or just flat out the same) to what exists now.
What I envision, if Apple does substantially bump the specs of the iPhone this revision, is that they'll likely discontinue the 8GB iPhone 3G and the white iPhone 3G.
The 16GB black 3G would drop to $199, and a new, 16GB iPhone HD would debut at $299, along with a 32GB iPhone HD at $399.
It's also a possibility of the capacities going 8/16/32 or 8/16/16, but I think it's very likely we'll see 3 pricing tiers this time around.