Honestly, so were most analysts, it's why Apple's stock took a hit. They were expecting it to basically be even more stripped down/cheap so that it could be sold even cheaper. Not just $100 w/2year contract, but $200-300 without a contract, making it viable for the pre-paid market.
Funny thing is, Apple's been selling those types of phones for years; the two year old model becomes free with contract or so inexpensive it can fit the prepaid market. Apple made a killing off the 3GS for that purpose.