This is what I am in the process of doing. The one problem with this is that, as I have heard, AT&T may require you to return the phone if you cancel within the first 30 days. However, when I spoke to an AT&T rep, he said that the iPhone would be "considered my property" once I payed for it at the subsidized price. AT&T really makes it hard for schemers like us though; my first bill was for $122, and it came only about a week after signing my contract. This included the activation and other arbitrary fees, but the due date for payment is the 28th-- about 3 days before my 30 day period is up! So, I have a feeling I will end up entering a new billing cycle if I try to wait until the night of the 30th day.
I've spent hours considering every option I have in order to end up paying the least in fees, but any way I look at it, they have me screwed. It will end up costing $600-700 in the end, which I knew going into it. I wish I hadn't been so anxious to get an iPhone. Although most 1st Gen iPhones are going for only a few hundred dollars less than this on eBay, I'd recommend trying to get the best price on one of those and forget the iPhone 3G. (But I do like the fact that the 3G's battery is not soldered in.)