actually, a replacement/"repair" for that kind of damage is $250 for an 8GB iPhone, $200 for the 4GB, and $300 for the 16GB from the Apple Store. (it says so under the iPhone warranty: $200-$300 for accidental damage repairs/out of warranty repairs)
of course there are occasional stories of people getting free replacements, but that's unlikely, so don't bet on that.
p.s. i have several cracks on my iphone's glass, and i'm hoping that AT&T/Apple will allow for a discounted next-gen iPhone if i renew my contract.... please... better than replacing my old iPhone with a phone that's just about to go out-of-date... :'(