You don't think that the on-screen keyboard will work very well? I think that if Apple's been working on this thing for 2 years, they're gonna have things pretty squared away on physical usability. If you want a physical keyboard, you will have to either sacrifice screen area or the size of the phone itself, as there just isn't any room as it stands.
I think they should put in a Suretype/Qwerty keyboard. I know they said that it doesn't work because buttons change. However, I think they should put a Suretype/Qwerty keyboard on there, and that's it. No five-way, or scroll wheel. Use the screen to navigate around. Because I don't think the qwerty keyboard is going to be changing anytime soon. Also, instead of embedding 4 or 8 gigabytes of flash memory, which jacks up the cost, put an SDHC slot in it. That way if people primarily want to use it as a phone and not be charged a hefty price for features they may or may not use, they don't have to be. And if people do want to use it as iPod, they can buy a 4GB SDHC card for $80 or an 8 GB SDHC card for $150. Apple could even make their own SDHC cards.