Why are we judging a phone based solely on hardware? If any of you have used an iOS device, you will know that it is pretty damn smooth. Smoother than any Android device I've ever used. Although, admittedly, the best I've used is a Sensation/Thunderbolt. I have not used the GS2. Because it's not out in the US yet.
I think most of you are thinking the 3GS is "outdated" because Apple doesn't really support it anymore. That doesn't mean it's shit. Apple just doesn't develop new OS updates for it. How old is the phone, though? 2+ years old? What came out two years ago at this time for Android? I dunno, the Hero, maybe? Or close to that time? The OG Droid? Why aren't they supported by their carriers anymore for firmware updates? They aren't even two full years old. The 3GS lost out on iOS 5. Which isn't out yet. It still runs iOS 4.
At this specific point, yes, Apple is overcharging for an 18 month old phone in the iPhone 4. At $199 for the base model, though, it competes with the likes of most top-notch Android phones when it was first released.
See, the point here is you can buy a 6.0L V8 Mustang or you can buy a 3.2L I6 M3. Does having the bigger engine necessarily mean the Mustang is more fun to drive? It has to work in unison, right? Otherwise what good is all that power? And this is where I think Apple, the M3, has the advantage. They use smaller, older hardware, but they still focus on the user experience. They make a pretty OS and a pretty design of the phone. And it really works well. Some people just have a hard time letting go of stereotypes and accepting that.