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Follow-up It wasn't too long ago that Sony was denying up and down that the 20GB PlayStation 3 was being discontinued, and that lack of availability was simply due to low demand. They've changed their tune, however, and have now announced that it really is dead. The 20GB model lacked several different features that the more expensive model has, such as WiFi more media slots. Sony decided that, due to low demand (so they say), the cheaper model will no longer be offered:

At launch, we offered two separate models of PLAYSTATION 3 to meet the diverse needs and interests of our PlayStation fan base. Initial retail demand in North America was upwards of ninety percent in favor of the 60GB sku, so we manufactured and shipped-in accordingly. Due to the overwhelming demand for the 60GB model from both retailers and consumers, we have ceased offering the 20GB model here in North America. In addition to the larger internal hard drive, the 60GB PlayStation 3 features added storage media slots and built-in Wi-Fi not found in the 20GB system. Based on retailer and consumer feedback, we have decided to focus our current efforts on the more popular 60GB model.
So anyone looking to get into the PS3 world will now have to sink at least $600 into it. Interestingly enough, the 20GB model was the one most difficult to find in stores – when the 60GB was often overstocked and stores were practically begging people to buy them. Is this really due to “popular demand”, or has Sony decided that the 20GB model was too much of a loss?