I read some of this stuff and wonder what people are thinking.
Intel needs solid competition for the Phenom II?????????? The Earth is flat? The Sun is cold? You're smart?
The Core 2 is considerably faster, and is a lot smaller than the Phenom II. In other words, outside of a few workloads, it's dramatically better. There's no comparision. It's cheaper to make too.
Phenom II is competitive on price though, because AMD is losing money. Intel does not more a "modern" processor to compete with the Phenom II. They could lower prices and destroy them. Even if they priced their Core 2s the same at the same clock speed, they'd seriously hurt the "modern" Phenom II, because it can't compete clock normalized.
The i5 is a good move. Actually, it made a lot of sense to release a high end chip first. What's the point of releasing a mediocre chip and then going higher? At the initial release, there would not be so much reason to buy them. This was typically how it was done long ago. The new chip would be very expensive, and high end. They would release lower end versions that moved them to the mainstream. Examples are the 386sx, 486sx, 8088, 80188, 80288 (the latter two were used mainly in embedded apps though, and rarely if ever in computers).
The i5 could offer better performance than the Core 2 at similar price points. If lower the price of the processors, and also the motherboard, the combination puts them much more squarely in the price range of the lesser Core 2, and the much lesser Phenom II. So, it could be a very popular and important release since it could finally bring Nehalem into more mainstream pricing.