sjo, I've dealt with idiots at Cingular (I work for RadioShack, so I'm even occasionally dealing with inside lines), but you take the cake. Cingular wants to sell phones, and they want to keep people under contract as long as possible. Apple wants to sell iPhones, and they don't care who they sell them to, as long as that person will be using Cingular for the next two years. In summary, no speculation necessary:
All customers, regardless of current status in contract with any provider, will have to pay $500-600 to Cingular/Apple for the iPhone, and will be required to sign a two-year contract from the date of sale, whether it is an extension or a new activation.
I've done plenty of midterm activations myself, and there's no issue, except of course the customer does not get the subsidized price. With the iPhone, it's not an issue. Even in those cases, Cingular likes to try to get them to resign a contract, though it's not usually required unless you change the plan. Presumably, since the plan will have to change in some way, that is the justification for renewing the contract two more years from the date of purchase.
jW