OK, sorry, a generation out of date :-) Still, a 5mp lens/CCD/flash package, even allowing for miniaturisation, isn't more than a few tens of pounds at absolute maximum. There's still a hefty markup IMHO.
>Why does an iPhone cost more than an iPod Touch, a standard 2G phone and a 3G USB dongle?
I suspect the real reason is that Apple keeps the iPod Touch cheap to sell to people who can't get an iPhone for some reason (they're too young, they can't afford the data plan, their employer insists on BlackBerries). When they have a chance to buy a smartphone of their own, it'll probably be an iPhone, so they won't have to learn a new UI, or walk away from the apps they've bought.
Why does an iPhone cost more than an iPod Touch, a standard 2G phone and a 3G USB dongle? That's all the hardware is.
Why does an iPad with a 10 inch screen cost twice as much as a netbook with a 10 inch screen and a keyboard?
Apple may have found some good niches to milk for cash with some attractively designed products, but cheap they most definitely ain't.