I just looked at the Apple Store, and it appears that they're slimming down their line significantly. There are only two choices of iMac G5, and both are pretty loaded. They're probably doing this as part of a streamlining to the Intel chips.
I think it's very difficult to make the iMac for under that $1,299 price point and still maintain margins. The goodies probably aren't that expensive to make.
I'd love to see a $999 iMac but I doubt that it would happen. You can always buy a $999 iBook and I think Jobs feels things are trending that way. I daresay he's right, too.
D