I don't think you will see a price reduction on the Iphone, rather, I think you will see Apple, give you more hardware for the same price.
8g will become 20g
4g will become 10g..

But I don't think the prices will change. If the prices do change, maybe it will be $50-$100.
What may happen though, is those of us with 8g, might want to upgrade to the 20g.. And we will sell ours at a cut throat rate.

btw, I know this is sort of hard to explain because the Iphone looks big.
But truth is, it's really small. Probably one of the smallest phones I've ever owned. It's thinner than a RAZR, (much thinner.) and the thing really hides itself in the pocket. You just can't believe how small it actually wears !!

B

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"When two people agree on everything, one of them is not necessary" - Arliss