From my reading of the situation, the odds of making a living from the sales of consumer apps for the iPhone are worse than winning the lottery. The price point is too low, and the competition is too high.

However: there's a lot of money to be made custom-coding free, branded apps for companies who want the exposure/traffic an iPhones app can give them.

And, there are definitely opportunities for using the iPhone as the last link in the chain in line-of-business applications.