I understand what both of you are saying (you and the poster above you), especially in terms of citing the iPod nano as the basis for the argument for an iPhone nano. The problem I have with that comparison is basically the same general reason why I don't think Apple will wade into the saturated basic phone market. The problem is that the iPod came into existence within a market that wasn't satisfied, and so Apple had free reign to explore each facet of the music player market. However, the same cannot be said of the cellular market, as I will endeavor to explain.
When Apple released the iPod it was on the cutting edge of technology and consumer trend. As such, Apple had little viable competition, and it quickly distinguished rivals like Walkman (i.e. disc players), and then other form factors like mini disc players. Basically, the market was open for Apple to create whatever consumer trends demanded. In that particular period, Apple was able to capitalize on a range of consumer demands in a market virtually free of real competition. And so the iPod, and the various form factors it manifested as, took almost total control of the market. Now Apple was the first to do this, and so they set the trends, including ultra portable, and ultra-high storage.
The problem with comparing the iPod to the iPhone is that the iPhone came into fruition in an entirely different market environment. To my mind the iPhone walks a tight-rope of a saturated and an unsaturated market. The former market would be the general "cellular" phone market, where there are numerous brands of phones that generally fit (or did fit) consumer trends. The phones range from hyper portable and simplified to what I would consider to be on the verge of smartphone, where they might have two components like a music player and regular phone capabilities. In this sense, then, Apple is entering a market that is saturated, that is well defined, and whose needs are met by a variety of cellular clients, including LG, Samsung, Motorola, and so forth.
However, Apple also entered a niche market (albeit a rapidly expanding one). This market I would call the "smartphone" market. Although there are some players in this market, the consumer trend hasn't wholly been fed yet (or hadn't prior to the release of the iPhone). While these convergence devices offered the potential for multiple avenues of productivity or pleasure (email, music, cellular), they were all packaged in a way that detracted many people, and thus largely lacked widespread consumer attraction. However, the iPhone to my mind modernized the convergence device by packaging capability in a way that was appealing to the consumer. As such, Apple has, in a way, set the trend for smartphones. This is evident by the fact that many of the latest smartphones attempt to emulate some or all of the traits that granted the iPhone widespread appeal.
Now, considering this, we recognize that Apple has succeeded in the niche market, perhaps mostly because that market hadn't really been tapped. It's pretty obvious by current sales and by subsequent design and astethic trends among competitors or would be competitors that the iPhone has set the trend in the smartphone niche market. So in a way, the iPhone is exactly like the iPod, in that it entered and captured a market that was largely unsatisfied. However, the same cannot really be said for the wider cellular market because that market has already been satisfied by numerous cellular devices.
That is not to say that Apple could not enter the wider cellular market, but it does suggest that to compare the iPhone to the iPod (in terms of having a simplified version for wider appeal) is not fair. It is not a valid comparison because unlike the iPod which came to fruition in a market largely without real competition, the consumer appetite for "cellular" phones (simple phones) has already been fed by a variety of clients. The fact that the market is saturated (or that there are so many devices that all successfully accomplish the task of "cellular" phone) that it makes little practical sense for Apple to try to enter a market where it has nothing to offer in terms of satisfying a market where satisfaction was lacking. Unlike the iPod, the cellular market (in terms of simple phones) is rigidly carved out, and consumers are satisfied. In that sense, the likelihood that Apple can sweep the market and snatch away a worthwhile amount of people from the market seems unlikely to me. Moreover, it means that Apple likely doesn't have the inherent ability (by way of an unsatisfied market) to set a new trend and design a device that has such great appeal as to upset the current balance held by other manufactures.
Considering this, while the iPod might seem like a valid reason why Apple should make a simplified phone just as it made a simplified (or rather smaller) iPod, the comparison is flawed because it doesn't consider the market characteristics under which each device was created. By Apple's success, in many ways the iPhone has revolutionized the niche "smartphone" market quite like the iPod revolutionized the music player market. However, the basic cellular market, at least to my mind, does not require, by its very nature, any revolution, as arguably the cellphone cannot be further simplified than it already is. As such, there isn't the demand by the market for a device that will satisfy its needs. In essence, there is no point for Apple to do what has already been done.
That doesn't at all suggest that Apple couldn't make a simple phone, however the basic point I'm trying to make is that there is little practical sense in Apple doing something that is already done (and arguably done very well) by a variety of other manufacturers. As such, while it's not impossible, it is certainly more than a little impractical for Apple to try to enter a market that is already satisfied to such a degree as the cellular (simple phone) market.
