1) Apple's all about fit and finish.
2) Apple's all about ease of use.
3) Apple's all about selling the best possible product to the average consumer.

The iPhone seems to fit right in with these targets, and really, what price would you pay for something that does the basics, but does them well? Mobile email, even on a Blackberry, is lacking in a few big desktop features. Mobile browsing on anything south of the 770 is pretty much junk, for that matter. I'm not saying that the iPhone is as good as the 770 on that front, but it's as good as you can get with that screen, I'll bet.

As for the platform/performance arguments, let's leave it at this: My 867 MHz AlBook is still more usable than comparable PC laptops from the same era, and I'm running Tiger on it quite comfortably. Yes, a modern laptop would be able to play more games, crank out much more work in Photoshop, etc., but as a general purpose computer, it's more than adequate. Apple squeezes a ton of functionality out of their hardware, well more than you see from Microsoft, which is probably the one good thing about Apple's control from the software down to the silicon.