There's no doubt there are marketing decisions being made for maximizing profits. Remember though backlogs, stocking, taxes, etc. can affect profit margins and creation of rebates. Although rumor has it Apple is making a healthy profit on each iPod, their price drop did correspond with Toshibas drives (and a second producer) going into larger production. I didn't agree with the original iPod having such a high price resulting in using the smaller (1.8-inch) drives, but keep in mind the retail of the 5 GB drives from Toshiba were the same price as the iPod itself. Assuming Apple got a deal, it may have covered the rest of the components, stocking, etc. The iPod sold, Toshiba increased production, dropped prices on drives...
I'd still like to see iPod prices drop further, but at least there's a back production reason for the changes.
And keep in mind memory isn't the same price in all forms. The above is an example. A couple years ago I paid $200 for a 340 MB Microdrive. Right now 1 GB is running about $150 retail from IBM. I don't know if Rio uses an off brand and likely they're getting a very good deal on them, but figure they're still paying in orders about 10,000 from off brand Cornice at ~$75 for 1.5 GB. Other components, packaging, advertising, support staff, development, maybe even some profit comes out of everything else. $299 is too high, but $119 seems to be cutting it close. One of those rebates is technically from Buy.com, but who knows if that's entirely coming from them or not.