I am with you. I don't see how you could call it a dumb phone at that point.
It is still a foolish idea. To keep costs down, you would probably use the same chip as your other iPhone / iPod Touch or the previous generation chip. You might have less flash, but the commodity chips have increased in size. The biggest cost savings would be to use the original iPhone LCD resolution. No significant cost savings for Apple comes from just having a browser phone. Plus, it would annoy app developers, increase support costs, and cost Apple their 30% cut. I see it as a no go.
It is still a foolish idea. To keep costs down, you would probably use the same chip as your other iPhone / iPod Touch or the previous generation chip. You might have less flash, but the commodity chips have increased in size. The biggest cost savings would be to use the original iPhone LCD resolution. No significant cost savings for Apple comes from just having a browser phone. Plus, it would annoy app developers, increase support costs, and cost Apple their 30% cut. I see it as a no go.