It's called jailbreaking and unlocking.
If someone unlocks the new iPhone so it can work as a touch (music/movies/wifi/app store) plus has the camera, BT headphone support, speaker (it's noce for YouTube and whatnot), and GPS (with standalone map software, of course) I might be tempted to sell my touch and eat the loss on it to use the iPhone as a stand alone device.
For me it comes down to $60 per month being just too much for a cell phone plan, even with unlimited data, especially without unlimited nights/weekends/texts.
Sprint (say what you want about the CS - I've not a problem with them personally, and I've had nothing but trouble with ATT - but I'm not going to argue with anyone about it) will give more more minute, unlimited nights/weekends/text/data/picture mail/video mail, and earlier (7pm) nighttime rate start time for $30 per month. Half price of ATT.
I can get a Palm Cetro for $99, after rebate. Again, half price. The iPhone is NICE. It's awesome, even the 1G model without all the new features. But, I don't think it's 2x as nice.
8gb iPhone + 2 years service = $1639
Centro + 2 year service = $819 ... that leaves a lot of cash for whatever it is you feel the iPhone gives you that the competition doesn't. iPod touch and a nice GPS will still leave over $300 in your pocket at the end of the day, and those will keep working for nothing when your contract runs out.