I'm calling BS on this. Nobody would pay $500 for a phone that just has some "icing on the cake." The iPhone is billed as an all-in-one phone and video iPod, not as a phone that also can play a little music and video.
I'm calling BS on this..I have several ipods and about 300gigs of music. I don't need all of my music in my phone and in fact, I haven't even used the ipod function in the phone at all. I've used it for phone calls, wifi, email and I am totally happy. If i need music it's in the phone. If i need a movie I also have that.