IMHO 500 euros is reasonable considering that this is almost a computer in your pocket with real control for the user. It is my guess that an iphone 3GS would cost more than this without a contract and the device looks good as the iphone.
The Samsung i7500 Galaxy Android handset is less than €400 without a contract.
One reason might be that the Samsung has 8 GB storage, the Nokia has 32 GB. The Samsung has 320x480 pixels, the Nokia has 800x480. The Nokia also has OpenGL for Exposé-like task switching etc.
And a real keyboard.
iPhone3GS, without contract and SIM-free (you can use it with any operator), as it sell in Italy, is 599€. So 500€ is cheaper (specs are better).