UPDATE (Aug. 26):
For those of you trying to get a hold of the Excessive Off-Network Usage Department directly, their number is: 866-704-0180 or 866-406-5247.
Just got off the phone with the 6th customer service rep today (in the excessive off-network usage department), who is canceling my account, waiving my ETF, and letting me keep the iPhone. She initially said I needed to return my iPhone in order for the ETF to be waived. When I asked to see the section in the terms and conditions that dictated this, she quickly put me on hold and said her manager had authorized my retention of the phone with no ETF.
My guess is that this is an unofficial policy and they will push the customer to return their iPhone, and most likely do. However, because the customer and ATT are bound solely by the terms and conditions, there is no legal reasoning behind this "requirement".
As of today my ATT account is cancelled, my ETF has been waived, and I get to keep my iPhone.
NOTE: A warning to any devious readers: This is not an easy or sustainable process. Activation of my ATT account took nearly 3 days of 2-3 hour phone calls, the use of a second address in an ATT area, and the shipping of my phone from ATT to that address, then from that address to me. Since then I spent roughly 12-14 hours on the line with ATT reps explaining and re-explaining my situation, simply to get single questions answered. Once it came to termination of my account it took 6 separate calls, 5 disconnects, and 4 hours to get to someone with enough knowledge and authority to do anything useful, then another hour to finish termination. My retention of the phone was made possible due to patience, lots of free time, legal know-how and recourse, and most importantly an overwhelming familiarity with the Terms and Conditions and how to use them. This is in no way a free ticket to get iPhones at subsidized prices, and nor is it meant to be.