It is a little expensive, but not based on the technology that is included in the phone, its the fact that the business model that Apple are using is so alien to the general consumer in the UK. Let's not forget that this is a phone aimed at the consumer market, and not the business market.
The most popular form of mobile phone in this country is PAYG, which isn't available to the iPhone, and those that do get contracted phones in the UK, usually get free, or dramatically reduced phones as part of their deal with an operator. Therefore asking people to pay a £269 premium on top of a contract is quite an ask in such a market. I bought one, but I feel that my purchase was justified, as I badly needed a new iPod, which I would have been spending at least £200 on anyway, so the premium for me was the extra £69.
The reason that most people find it expensive hasn't got anything to do with the tech thats in the phone. Most users simply use their handsets for phone calls and SMS messaging. Technology features on phones such as the camera, and 3G technologies are for the most part still underused by the average UK user. I've had camera phones for years, as do many people I know, but none of them use it as their primary camera. Likewise, no-one uses video calling, or WAP/Web services on their phones. So these points are not important to them - its the fact that they'd be spending nearly £300 on a phone, which, despite offering an array of different features, will still end up being used for the same thing they do with every other phone they have ever had - phone calls and texting.
The only extra feature which they would probably be interested in is the fact its an iPod too - which as I stated before, is one of the reasons why I bought one myself.