An AT&T spokesperson just confirmed the following with Boing Boing Gadgets:
Current iPhone customers can upgrade to the 3G iPhone and pay $199 for the 8GB or $299 for the 16GB model. They will need a new two-year contract.
Customers who purchased a 2.5G iPhone on or after May 27 and want to swap it out for a new iPhone will be able to do so without incurring an additional handset charge for the new device. (There will be a 10 percent re-stocking fee.) They will of course need to turn in their 2.5G iPhone.