I don't know if I see this as a "mess". I own a HD video camera and a Digital SLR camera. I take more video and photos with my iPhone 3GS on a day-to-day basis than I do with either of the other devices. I also play more games on my iPhone than my Xbox or my Wii.
I don't see this as a "problem" or a mess. Sure the iPhone isn't a better camera, video camera or gaming device.... but the convenience matters over "better" in so many ways. To the point that it needs to be significantly better than the iPhone 3GS to make me want it.
So... I may still buy a high-end HD Camcorder / Next Gen Xbox in the future, but I'm certainly not going to buy a Flip Camcorder or PSP.
arn