The real news under the news is that with the 16g ipod touch, the 16g iphone is hiding under the counter. The further indicator is the withdrawal of the 4g iphone. I bet that by Christmas (or Jan at the latest), there will be a $399 16g iphone.
Some are saying a 3G, 16GB iPhone will be launched at Apple Expo Paris (Sept 25) for Europe, and it would fit nicely in the $599 price slot.