Lots of debate on pricing and so forth. As I see it, there is less than 1% chance that the 4G comes in at something less than $299/$399 list price.
And for the base model $199 was regarded as an important price point, so that will remain. However, for $199 you will be getting something very stripped down, and most likely a 3rd gen model. Apple will not give away the goods for cheap. They never, ever do.
iPhone 3GS still exists for $99 plus contract. I don't understand why anybody buy that instead of just coughing up another $100? Nevertheless, Apple still offers it for a low-end option. I'm ignoring antenna-gate, since I dont' think that factors into that particular business decision by Apple. Apple will still over something stripped down for iPod touch for $199, just don't get your hopes up about what it will be. No retina, likely same screen as iPhone 3GS, same CPU as 3GS, same RAM as 3GS, camera unlikely, facetime unlikely, probably 16GB. In other words, most likely a 3rd gen model. Yes the $199 model will pale to the $299/399 models, just as the iPhone 3GS pales to the iPhone 4.