The front page of this site points out that anyone who upgrades from an old iPhone to a new one can keep their old one as just a media player.
So I'll bet you'll see old iphones on ebay selling for $199 or less. Buy one of those and have a Touch with camera and and mic and speaker. VOIP anyone?
My point? If Apple wants to sell more iPod Touches, those Touches will be competing directly with the old iPhone at $199. THAT ought to bring down the price and bring up the features, because the top of the non-phone ipod heap is now the old iPhones!
I've actually been thinking about this just today. I'll bet the 8GB iPhone2G will go for around $199 (which is awesome for current iPhone owners...they can basically get a free upgrade that way). That's a good price for a Touch w/camera and voice possibilities (i.e. Skype). Better price than a Touch, anyway. Really the only think that could compete with that to me is just buying a PSP, which does Skype as well (and is a nice game console too).
Does anyone know--
If I buy a used iPhone2G, can I call AT&T and use it as a phone? Would I have to sign a 2-year for that do you think? Also, could I get the current EDGE $20/month data plan with an old iPhone?