While I think you're probably right about the quality not being worth it, I recently moved away from my bigger camera rig to a tiny Panasonic point-and-shoot in a Panasonic housing with no extra lenses or strobes and people are amazed that the pictures I'm getting are coming from such a minimal setup.
I know I'm frequently impressed with the picture quality I get from my iPhone 4 on land, so I guess I'd like to just see what it looks like underwater. If someone made a housing for <$250 for a "camera" a lot of people already own and the pictures were decent, I think a lot of consumers would jump on it. There's a strong correlation between having a camera and diving more regularly, so that would be good for the sport as well.
I hope that the people who think that this is a good idea don't take this the wrong way, I am posting to try to give some insight and help with the discussion. But I guess if the only question of interest is "where can I get an iPhone housing rated to 130 feet?", then I don't have much to add. But there is a very big difference between photography through air and photography through water, and that is the key to this question...
My iPhone 4 takes incredible photos on land, I'm so impressed with it, that I rarely use my Canon S90 any more. So maybe the case rated to 20 feet would be a good idea, since that would be about the limit of any usable ambient lighting (the iPhone is not great in low lighting, very noisy, and the strobe photos are not so great).
Any sort of photography at the depths that the OP is thinking of is going to be pretty poor without an good external strobe. The built in flash in the iPhone isn't a true strobe, but it is marginally OK topside.
In underwater photography gear, the housing is often several times the cost of the camera, so buying what might be a pricey housing (to fulfill the requirements of being good to 130 feet, and of allowing touch access to the screen controls) to produce an underwater camera system that at best would give marginal results seems to be a waste of money.
What the OP has proposed to save the cost of a digital camera in days when good ones are very cheap, and used ones are widely available, doesn't seem worth it. Especially given the overall cost of diving as a hobby. Let alone the risk of flooding one's cell phone ($699 since you would be buying in the middle of a service contract), which is likely uninsurable through standard underwater gear policies.
Just my 2 psi...!