My view on why they've done it this way is that they've retained a clear visual deliniation between the higher end iPhone 4s and the low end 3GS. No-one who has a 4 or a 4S is going to be annoyed that they guy with the cheap iPhone looks like he's got the same thing as they have.
That comes with the downside of making the cheaper model a slightly tougher sell - it's visibly "old" - but that's Apple protecting their key market, the high end stuff.
But it will be interesting to see how the cheap [1] 3GS performs commercially against more modern Android phones in the same price bracket. Will Apple's brand have people going "wow, I can get an iPhone" or will people be saying "I don't want a two / three year old phone regardless of who makes it".
Obviously the attitude will vary from person to person but it will be an interesting test of Apple's name value to see if it can give a boost to older hardware.[2]
[1] I say cheap not free as it's free on a relatively pricey contract.
[2] I'm not running the 3GS down - I have one in my pocket right now, it's my primary phone, just it is older hardware and I think over the next 12 months will begin to show it's age more and more.