I think a VOIP device, that people could use for the internet, email and texting, multi user gaming, that allowed them to make the odd call here and there and even better making long distance calls over seas when traveling with WIFI access, would be a great niche device. Great for the person that does not want a voice plan and truly doesn't make many calls.
This also opens up the world to devices that are not cell phones but do have internet connectivity, as in portable game consoles. With built in "Google Phone" you can make calls as well as battle others when you have a wifi connection. So if Google is thinking in this way, they don't have to JUST make a phone, but can put their "phone" pretty much into anything that you'd expect or want to have WIFI built in.
Bundle the Google Phone with Google Voice and pop all that into a portable WII/DS/PSP/Netbook, cram an inter ear headset ear bud, inside your ear and your off to the races. (well as long as there is WIFI at the races!):icon_ banana: