I hate to add to the speculation but just yesterday I was looking into reknewing my contract with o2 which falls a week after the iPhone is released. Now although I have no proof of it, I distinctly remember reading in the 'Exsisting customers' section under 'availability' on the 02.co.uk website, it read
"customers with an exsisting contract who upgraded before September 18th 2007 will be able to switch to an iPhone contract and recieve the iphone without any payment or incurring any charges for leaving your current contract" or something more or less along those lines - either way confirming the rumor. However the page has now been re-edited.
But I guess we will just have to wait to see! It would be a great deal as I'd definitely consider switching, however the current iphone and contract price is a bit to steep for a none 3G phone.