Your lifetime budget question is interesting. I have a first-gen iPhone that I bought in April, and I'm keeping it, partially because I don't want to pay higher service fees. I'm hoping to get three years out of it, and I paid extra for the 16GB because I think the extra space will mean I can happily use it longer.
But one of the reasons I don't mind having paid $500 for a phone is because my overall Apple budget, and my overall gadget budget, is pretty reasonable. I got my iPod almost-free in 2004 with my education-priced Powerbook, and I had never paid for a fancy phone. So averaged over four years let's say I've spent $150/year. That's not that big a chunk of my budget.
Rather than always buying the newest and shiniest, my general principle is to try to buy near the top of the line---extra memory, extra space, and then use a gadget until it's dead, and that has worked pretty well for me.
What to Do With Your First Generation iPhone?