You do realize that this article ( form August -beofore Apple announced the new iphone) was simply speculating on what the next iphone to be released would be.
You do not have to guess any longer. Apple has allready released the iphone 4s.
You seem to be very confused about what this is saying.
This article simply guessed that maybe iphone was going to announce a new cheap iphone at the conferance which happend a couple of months ago.
We now know that this was completely wrong. Apple released the iphone 4s.
The article does not mean that they would give iphone 3gs users a iphone 4 as a replacement. It meant that they would not make 3gs any longer and would now make a cheaper iphone 4 instead.
We now know that this was incorrect.