Apple Coming Up With iPhone Lite?

Reports have surfaced again that Apple and Verizon Wireless are locked in talks over a possible new iPhone, which has been described as an “iPhone Lite”, supposedly a smaller and less expensive iPhone, and also another device which could be a touchscreen media tablet, possibly something along the lines of a netbook. Of course, there still is the minor detail of the exclusivity deal between AT&T and Apple with regards to the iPhone, but some parties speculate that the new devices could be different enough from the current iPhone to bypass that restriction. What do you think, possible, or just a rumor?