The thing is that most people upgrading are not paying $650 bucks. If you are the head of the account than you can likely upgrade for $199 and if you are not then you can upgrade early for $400. We sold 4 iPhone 4's a few weeks back for $400 each so worse case you are breaking even and I actually made $200 on the upgrade. Done it every year and I have always made money.
1. I think most would be considering the 32GB or higher and that lists for $649. For me and many others the 16GB is way too small.
2. Mine and many others' full discounts don't roll around until mid-Feb, so it'll be subs price plus $250. That makes even a partial discounted 32GB phone $549 and a 16GB $449 + TAX, NOT $400.