That might be a fine strategy for an ipod where for some it is clearly more cost effective to pay an extra $40 and buy an new one, but were talking an extra $515 if you apply the same principal to the iphone and but a new one rather than replace the battery.
So with this kind of price differential I feel they will not want a $600 disposable phone so will want a new battery. There is also the remaining period of the two year locking to AT&T to consider. So now they lose their phone for however long the 'send to replace battery, replace battery, send back to user' cycle takes.