I think I can clear up some misconceptions:
Right now, the 'original' Iphone is still available to purchase and you can take it out the door without signing up for a service contract with AT&T. The 8gig is $399, and the 16gig is $499. You can 'jailbreak' the phone to add a variety of small Java applications to the phone that are not available from Apple. There are literally hundreds out there, from GPS-type apps, to games, to video wallpapers, a level, various cameras, it goes on. There are 'applications' on various sites that will do the jailbreak process in about 5 minutes. One of the advantages of performing the 'jailbreak' is you can use any SIM from either AT&T or T-Mobile in the phone. For instance, right now AT&T has no business phone plans for the Iphone. I get large discounts for having 50 or more phone plans with AT&T with my business. After jailbreaking my Iphone, I can take the SIM out of my MotoRazr, pop it into my Iphone, and the phone works fine. I'm not stuck with a plan I don't need, and I can use the existing plan I have. If for any reason I have a problem with my Iphone, I just plug it into ITunes, do a restore, and it puts the phone back into the condition I bought it. Neither AT&T or Apple will know the difference. You are not physically damaging the phone by jailbreaking it. All you're doing is modifying the OS that runs the phone to take advantage of running free apps on it.
Coming July 11th, is the new Iphone 3G. It will have a faster network, GPS capability, and yes, cheaper. The 8gb Iphone will be $199, and the 16gb (in either black or white) will be $299. HOWEVER, you CAN NOT just buy the phone and take it out of the store. When you purchase the phone, you will have to activate a minimum 2-year contract with AT&T at the store. The minimum plan is $70/month. This is how AT&T is 'subsidizing' the initial price of the new Iphone. Yes, the new phone is $200 cheaper up front, but the phone plan is a mandatory extra $20/month over the current Iphone minimum plan ($50/month). So basically you'll pay an extra $240 a year for the new phone over the current Iphone. Multiply that times two, and the cost is $480. So you can basically add that to the price of the phone - $679 for the 8gb, and $799 for the 16gb. Granted the new Iphone will have faster downloading capabilities, is a little thinner and lighter, has a normal headphone jack (no proprietary headphones at $30), and included GPS capability where you are supposed to be able to track other Iphone 3G users that you know.