It's great to see people excited about this news, although keep in mind that SteveB didn't confirm nor deny a "Zune Phone". It's speculation at this point, but I totally agree with Jason - it's a win win in many ways, for Microsoft, and customers of both - Windows Mobile and the Zune Pass (subscription service).
The only "downside" I see to this is the amount of time it would take to build and integrate everything together. Hopefully that's not what's causing the delays in getting the next version of Windows Mobile out
-Mel
(PM, Windows Mobile)