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I don't think the selling point of iPods was ever that they had the most features ("no wifi, less space than a nomad..."), but that it had, and arguably still has, the most intuitive and easiest to use interface, along with incredibly easy synching and the seamless integration with the iTunes music store. The iPod was definitely not just successful due to marketing.
I think the iPhone will be similar: a few core features that are very easy to use, not the most features you've ever seen packed into a phone. The innovation will be in the UI. But people should wait until it comes out before dismissing it as low end or before hyping it as the most high end phone ever. It'll depend on whether the multi-touch interface actually works well, and whether it really has the fully featured safari web browser they claim it does, among other things of course.