Confirmed: O2 have 16GB iPhone £329 [updated]

Confirmed with the manager of an O2 store. The Engadget rumour is correct.

Handsets are in the stores being ‘checked in’ now. Available from 1:30pm.

Update: Still no news on the UK Apple or O2 sites, but the US stores have them listed at $499 which confirms the price leaks were also correct.  No new features, just a second model to run in parallel with the existing 8GB model.  iPod Touch also gets a bump to 32GB too which may indicate this form factor still has space for more…

My thoughts?  16GB is nice, but £329 isn’t going to have the people who haven’t already bought one flocking to buy one.  Other than a price drop, 3G is the only thing that will do the job here…