It's a good argument, though you forget that there is no real physical difference between some of the ranges you mention. Screen size and CPU speed hardly qualify as totally different products. The problem with differentiating the iPhone concept, is that you already got the app store, and thousands of programs written to a specific screen resolution (and partly size).
Apple has said that they believe the way to sell phones, is by supreme software (that must include the app store concept). So as convenient an iPhone Lite might sound; because the current one isn't exactly a small phone, I find it hard to fit the concept. The iPod touch seems to me to be the "iPhone Lite". Same as iPhone, perhaps with a camera in the future - and lacking phone-functionality (besides VOIP).
The next best thing - wouldn't you say?