perhaps the reasoning is that mobile phones were about to start eating into ipod sales as they are increasingly becoming competent music players and it's better that it's apple's own phone that is doing this rather than those of other companies.
Totally - I agree with you on that. Apple would be best off getting their hardware into everyone's hands before other challengers such as Samsung and (ugh) LG do. However, it seems like they're supporting iTouch as the other half of this "mobile platform of the future" and a subsidy on one half, devaluing the other still doesn't make sense. Unless of course, they start giving the iTouch away for free to everyone (and not just college students)...