GSM-only strategy makes sense for iPhone
There are a few points to highlight when discussing the "shortcomings" of the iPhone. In reality, they may prove to be shrewd business decisions by Apple, but only time will tell. In no particular order...
1. Apple likely chose the GSM-Edge network due to the worldwide size of that market -- the vast majority of European and Asian markets use the GSM technology, not the EVDO standard in much of North America. This choice expands the number of markets and potential for rapid growth, economies of scale, and establishing a foothold in multiple regions before competitors copy the technology and introduce their own knock-offs.
2. Feature set -- smartphone, email, iPod, video -- these features are targeted at the upper end of the consumer segment and not at business users. This segment is highly mobile, has a greater amount of personal time, likely spends more time than average commuting (via public transit or in groups), and has a relatively high level of disposable income. The target is likely the 16-34 year olds who are already users of the iPod and are OK spending >$500 on the latest technology (iPod, PS3, or the original web phones).
3. Manufacturing limitations -- you can only build so many units in a given time frame, so why not position your product at the high end of the market and get the feedback from people with a history of using high-end products and make adjustments over time.
4. Mid-market consumers and business users are more price sensitive and less tech-savy than most people realize. If Apple tried to be everything to all people, they would satisfy no one and end up tossing their iPhone on the pile of "nice ideas" like the Newton. Different versions on other networks are likely to arrive in the coming years as the bugs are worked out and the adoption rate increases.
Final comments: The wealth of new technologies in this device are likely to raise the bar for all manufacturers. The key for Apple is to position this device as a good phone with a great combination of iPod and email features. If they are successful, they have a chance at competing in a much larger market -- cellphones -- rather than being relegated to a niche device manufacturer (iPod).