Some very mixed news for the iPhone during today’s Apple (NSDQ: AAPL) media event with Steve Jobs. (Updated: The full video of Jobs’ presentation is here.) Jobs talked about how great sales are, how much people love it and about being on track to ship the 1 millionth unit this month—then he announced that the price of the 8GB unit was being slashed to $399 from $599 and indirectly suggested the 4GB model is toast.

Trying not to read to much between the lines but matching with anecdotes from AT&T stores about slowing sales, the current iPhone model needs a bump to make it through the 2G phase—and to make it appealing to people who otherwise might opt for the phoneless version announced today, the iPod Touch. Apple gets 10 percent of the revenue from phone plans so giving people an incentive to spend that extra money instead of simply carrying a cellphone and an iPod makes sense. (Yes, I know there’s a report just out about iPhone outselling smart phones but that was for July, which includes first-flush buyers. It also shows that the whole month didn’t come close to matching the launch weekend.) The announcement comes after iPhone owners would take a hit for leaving AT&T early.

iPod Touch: Same size as iPhone but even thinner, comes 8GB at $299 and 16GB at $399. Includes Safari and 802.11 b/g. Battery life per Jobs: 22 hours audio, 5 hours video playback. Shipping this month.

WiFi iTunes Store: Actually, the iTunes Wi-Fi Music Store in Apple-speak ... iPhone and the iPod Touch users can shop by WiFi and download directly to the device. Purchases will sync back to the iTunes desktop library. Partial downloads will be completed on the computer.

SBUX: A deal with Starbucks (NYSE: SBUX), touted during a cameo by Howard Schultz, integrates the coffee chain’s music into the Wi-Fi experience. Users in a Starbucks hotspot will see a Starbucks button; tap on it, find out what song is playing and buy it instantly with no WiFi costs. They’ll also be able to browse Starbucks’ playlists and connect to the iTunes store for free. It is exclusive with iTunes and rolls out Oct. 2 in NY and Seattle, followed by 350 stores in San Francisco Nov. 7 and eventually to 5,800 WiFi-enabled stores across U.S, most by end of 2008. Looks like using other features may require a TMobile hotspot account or access through AT&T. (No mention of TMobile that I can tell.)

Ringtones: Users are supposed to be excited about getting the right to pay another $0.99 to create a ringtone up to 30 seconds long from a song purchased through iTunes.