For current owners of the 4 and 8 gig. There really is no real reason you should get the 16 gig unless you actually want it. Later on this year they should be releasing the 3g version. I guess i will wait for that release.
Apple does not do this kind of "upgrade". For them you just buy a new phone. I am not even sure if they offer a service to make your old phone usable since it would no longer be active on the ATT network. So you might have to sell that one or something.
my initial thinking is that i will not upgrade - while 16gb is nice, it's not enough of a reason to sell my 8gb and go buy a new iPhone. however, i'll reserve final judgment until the SDK is released and we see some apps - if the apps are fabulous but also memory hogs, i would consider upgrading just for more memory even before a 3G version is released...
it seems a bit absurd that Apple wouldn't offer their customers some type of upgrade package so that they could disregard the old hardware and obtain the new without having to pay full price. i won't be buying the new 16 GB because 8 seems plenty. hell, my music library is at 5 GB and that still leaves me an extra 3 for movies, applications, and whatever else i want on the phone.