Palm just released the Pre a few days ago. The lines were less than spectacular, which Palm played down, but there was that tension–will the next-gen iPhone one-up the Pre?

The answer seems to be, you bet. The new iPhone 3GS has 2x the memory, about 50,000 more apps, longer battery life, much faster web browsing, a video camera (the Pre doesn’t have one), an internal compass, and a snappier OS. The Pre can run more than one app at a time and has GPS navigation free as opposed to having to buy an app (so you spend $10 more, big deal), and it has an LED flash. Both for the same price. Ouch for the Pre.

The Pre has a physical keyboard, and for those who need one, that’s a clincher. But Apple’s soft keyboard, frankly, works beautifully for me–I can type almost normal speed on it–and it has the flexibility to go landscape mode and to change languages, something a physical keyboard can’t do.

Add a $99 iPhone 3G which comes close to beating the Pre, and Apple catches the lower-end market at the same time.

The Pre has been hyped for months as a serious contender, and now Apple has sucked all the air out of the Pre’s debut.

Me, I’m wondering what extra costs Softbank will ask for upgrading the phone after only half my previous contract is up….