I don't think you'll have to pay $500+ for an Android Phone
Sure, there will be some upscale, high-end models. But, there will be some low end models, too. Afterall, Android can run on devices that don't have a touchscreen... or don't have a screen at all for that matter!
Combine that with the fact that Android, the actual SOFTWARE, is 100% free and Android Phones could actually be CHEAPER than the majority of phones you see on the market now.
Why? Because you're paying for:
You don't have to pay for the phone software, which ordinarily costs the carriers and service providers a decent amount to develop.
Android should actually CUT the costs of mobile phones AND you'll be able to download a butt load of cool applications for free.
Just my $0.02