Do you know if the Sleepcycle app is able to differentiate between your movements and someone else's? It seems like this wouldn't be possible?
This is obviously a totally different price point, but it seems like bringing a hardware-based solution here does offer some real and very tangible benefits.
That said, cool product, best of luck, and I hope you guys get funding!
(edit) Looking at your stand design - there's something distinctly un-Apple about it. Apple products have rounded feel to them, but they are squarish in their lines whereby your design is not. Try and imagine this [1] being featured on apple.com - you probably won't be able to, because it is off.
[1] http://www.idreamsaver.com/uploads/1/0/1/5/10151350/280100_o...
I would say so. Right now it looks like a collection of odd angles. Everything's angled. Also the stand is visually split into the front part and the back part, and it feels like they can be snapped apart like a chocolate bar. I would consider something like [1], whereby the outer shape is perfectly boxy, and there is angled recess for the phone. This is not unlike the original stand, but it's a very natural design choice if one goes for a simple look.
Another options is something like [2], which is also very simple and clean looking and yet has enough interior space to house your stuff. Proportions might be off, but you get the idea.
[1] http://img825.imageshack.us/img825/8940/iphonestand.png
[2] http://img684.imageshack.us/img684/5365/iphonestand2.png
Work on the design. It's an Apple userbase you are targeting, design is your product.