Scott asks: "I've heard comments on both sides of the argument, but what do you think? Does this make it more or less likely for apple to release the fabled iphone?"
I don't think Apple will release an iPhone any time soon, mainly because there are so many good phones on the market these days already. Products like the iPod filled a hole in the MP3 player market. Up until the iPod, everything was just mediocre. The same is not true for the (GSM) mobile phone market. Sony Ericsson, Motorola, Nokia, etc. all make excellent top end phones already, and these companies have an excellent range of phones too, from everything from the top end to the ultra low end.
BTW, Forbes provides more details on the Motorola/Apple iTunes mobile partnership. Of most importance is that although the Apple software will be bundled with future Motorola phones, it will not be exclusive to Motorola. Apple is free to licence it to other phone makers. Conversely, Motorola is not bound to Apple's software either. Motorola will be able to bundle music software from others as well.
One may ask what is the point of all this. I think the main purpose of this deal from Apple's point of view is to further solidify the lock Apple has on the legal download market. There are a lot of iPods out there, and the numbers are growing astronomically. However, there is no such thing as a very low end iPod. There are a lot of low end MP3 players, but none of them play Apple's iTMS files. On the other hand, mobile phones are ubiquitous, and the technology has now advanced to the point where it's feasible to have a cross-platform software applet like iTunes installed on these phones. Furthermore, people actually always carry their mobile phones with them. The same is not true for low end MP3 players. In other words, mobile phones with iTunes have the chance to largely displace the low end MP3 player market. Instead of dealing with this low end market with its own hardware, Apple gets to dominate here too through software.
As I said before, mobile phones are ubiquitous... and soon mobile phones with iTunes might just be ubiquitous, too.