@WolfPackFan
I agree with your sentiments, as I am in a similar situation, but I think your reasoning is exactly why they WILL release an iPod with WiFi Safari and Mail. If your reasoning is correct, that they wont release a phone-less-iPhone-like-iPod, because they fear cannibalizing iPhone sales, they are leaving out a huge section of the market, like you and I, who want the touchscreen internet surfing glory of the iPhone, but either can't or simply dont want to leave our current cell phone providers. While I think Apple does want to take over the cellphone market, at the same time, I think its ridiculous to assume that Apple intends the world to switch over to AT&T. And currently Apple is in a fairly lengthy exclusive contract with AT&T, severely limiting their potential buyer's market.
If I were Apple, on Sept 5th, I would blow the world away by releasing the iPhone technology to everyone who can't/won't switch providers. "Keep your cell phone service, but don't miss out on the touch revolution. Experience your music, movies, pictures, and internet with your fingertips with Apple's very own Mac Os X and Safari."
Now, instead of competing in the very small market of people looking for a new phone and willing to switch providers and pay for a 2 year contract, they are competing in a much larger market of people with/without phones, of kids, teenagers, businessmen, grandparents, all over the world (not just the US) without being tethered and limited by phone use.
And for those who say the new iPod wont have internet because the iPod is a media device, not a communications device... The internet is vastly becoming the premier way to absorb media! YouTube, streaming shows by network television, Flickr, iTunes, internet radio, CNN, ESPN, Fox News... I can go on and on.
Furthermore, I think everyone will agree when I say that the iPhone was designed as a convergence device. They bundled three things into one, so you dont have to carry around three different devices. Now why is everyone expecting Apple to limit their potential sales to a huge market in order to still convince a very small section of the market to buy three different devices? That just doesn't make much sense to me.
While of course all of this is pure speculation, and I may end up eating my words, I truly think the iPhone was a testing ground to see how the world would respond to the amazing technology. Of course Apple knew they were selling to a limited market and what better way to test the waters to see the demand of the entire technological world? Now is the time for Apple to truly reinvent the iPod, the device that saved the company, and the device that continues to provide lasting positive effects as well as a substantial portion of their total revenue. Already the iPod was noted to create a halo effect
of switchers to the Mac platform. Now they can not only sell their simplicity and design, they can also give the world a taste of Mac Os X and Safari!