The cheapest iPad is still $400 more expensive than the cheapest iPhone though. For many people that will be a big barrier to entry.
The comparison being made was the iPhone at launch. The iPhone sold like 9million the last reported quarter, or something insane like that. The first quarter it was available it did 1.1m or whatever the OP said.
Wrong, in fact at the time of release the iPhone was $399 or $499? + 2 year contract... or $699/$799 without. (I think those were the numbers anyhow) Your not reading what he's asking... 1st quarter (2007 1g model) iPhones sales vs 1st quarter iPad sales.
The iPhone has never been sold no contract. The first iPhone was $499/599 depending on storage, I think. They dropped to $399 and got rid of the 4gb model, as I recall, toward the end of that first quarter.
I'm talking about the current market. I think the demand for iPhones will still be greater because of the price. Most people are going to see this is a big iPod Touch, so why not get an iPhone. I think the iPhone OS is a blessing and a curse. People with iPhone's probably will not be compelled to buy it because they already have the same functionality. And people without iPhone's will see more value in a iPhone since it includes an actual phone. The question will be, what is the target audience. If Apple can find the target audience for this device, then it may take off.
No one is going to think to themselves "Hm. I want an iPad. Well, maybe I'll just get an iPod, it does the same stuff! On that note, I guess I will switch phone carriers and get a $70+ per month, 24-month contract instead!".
It's more the other way around. People say "I want an iPhone! Well, I don't want to pay that much per month... and I have a contract already. I'll get an iPod instead". The iPad will, if anything steal other companies netbook sales, low end MacBook sales (from people who have a desktop Mac and want a portable, too), and maybe steal a few iPod upsell sales (which isn't a bad thing for Apple, as it's an even bigger upsell).