Honestly, the more I think about it, the more it does seem like it could ultimately be a good thing if Apple can't use the iPhone term. I think it is needlessly limiting - sort of like if they had called the original color photo-capable iPod Photo the iPhoto instead (I know that's the name of their photo app, but you get my drift). The nice thing about the iPod name is that it is so generic, and works well to describe an inherently multifunction device. If Apple had released their original mp3 player as something like the iMusic or something, it would have been a much more limiting name (frankly, I think Apple is facing this problem with iTunes, as it is a silly name for an app that is increasingly doing more than managing music). I think iPod Phone makes more sense. Also, just looking at the Washington Post coverage, in their headlines they actually called it the iPod Phone and iPod Smartphone, not the iPhone. The iPod name is so well known now that it is probably worse to not use than to try and use iPhone.
I imagine at this point that Apple will still try and come to some settlement with Cisco (I'm kind of curious how things went from them being in final negotiations yesterday to Cisco suing today though), and if nothing works, I think Apple will just fall back on iPod Phone or some other name.
Long term I have a hard time seeing how this really hurts Apple. It's not like this product needs to be called iPhone to sell well. I'm not even so sure how much people care about these product names anyway - heck, my current phone is a Treo 650 and I don't even know what Treo means (and I didn't even pronounce it properly for a long time - I kept calling it a Trio instead of a Trey-o).