Prepaid doesn't have to mean cheap. From my point of view, I don't care if it's cheap. I just want it contract-free. I'll happily pay the full unsubsidized cost of the iPhone, provided it's unlocked and I can waltz up to any mobile provider in the world, say "I can haz prepaid SIM?" and start using it.
Given that an iPod touch starts at $199, can it really cost that much more to stick phone parts in the back of it?
At least in Australia, UTMS coverage is better on some carriers then GSM is. One of the carriers is even starting to convert their towers from 900MHz GSM to 900MHz UTMS. GSM can be considered dead at this point, and I think a UTMS chipset would be just as cheap, or cheaper than a GSM chipset.
Aside from the fact you just (re)invented the original iPhone, I don't think that's a device people would pay $300 for (add a bit to get Apple level build quality and profit margins).
Given that an iPod touch starts at $199, can it really cost that much more to stick phone parts in the back of it?