I think Apple iPod still means “music device.” Granted, all iPod’s but the shuffle do much more than that now, but I think in the people’s minds iPod = music. I think Apple is in the process of rebranding the “iPod” now, and I imagine in as iPod’s gain more and more features they will be recognized as more than music players, but I think it’ll be some time.

Calling it iPhone by-passes the issue of breaking people from the concept of the iPod as a music player. The iPhone isn’t an iPod that also makes calls — its an iPhone. For now I think it makes sense.