Though the iPhone has received much criticism for being poorly featured compared to other PDAs, having a high price and plagued with activation issues upon release, it has been selling extremely well. Those that do like it, love it, and are praising it. It again proves how successful Apple has been with marketing, and perhaps their 500,000+ units sold in a single weekend will make their 10 million by the end of 2008 closer to reality than previously thought.
One advantage a Nano-sized iPhone might have is a reduced cost, which would be very beneficial for Apple reaching out to customers that simply aren't willing to shell out $600 for a phone. Interesting stuff.