I have a fully-activated iPhone and I agree that this is a silly idea, chiefly because equally-advanced iPods are likely to be on the way in a very short time.
In fact, I think more mobile computers will be on the way from Apple... I use the word "computers" because essentially at their heart there is a computer, but in the contemporary sense "computer" has become an anachronism... So, call it mobile computing, mobile communications, mobile entertainment, whatever... The devices that we're likely to see in the next three to five years will blow you away.
What Apple is doing with the iPhone seems to me to be a "toe in the water" feeler product that they typically start with, and then various offshoots come out of that in both directions from the original offering and price point... i.e. larger, more features, and smaller, fewer features. The thing is, as an ipod and wifi computing device alone, iPhone doesn't really cut it. I don't mean in terms of features... I mean in terms of the overall user experience. As an iPhone/iPod/wifi mobile the whole package is definitely, absolutely worth it. However, there are other UI enhancements that could make for a better standalone iPod or iPod/wifi communicator.
That being said, if people want to tinker... so be it. I don't begrudge them that, and I'm not telling them to do other than they're set on. But for those of you sitting on the fence wondering whether this is the way to go, I will remind you that Apple's product lines always evolve and mushroom and given the general reception to the user interface concept at work (not just the multitouch but the departure from conventional pulldown menus, etc.) has been positive enough that we're likely to see even better-tailored iPod offspring very soon.