What kind of price increases do people expect to pay

I was thinking of doing the same kind of deal as well but then I remembered that technology evolves way quick. There might come a new socket for the next iteration of intel's chip, there might be some stiff competition from amd, there might be a major bug on i7 chips...who knows?

Really, building a high-end system now (or soon with 1 generation old parts) should carry you over well into 2010-2011 just the same and quite possibly farther into the future. The general feel you have nowadays is that applications are not limited by the hardware (except for high-end games at high settings). Because of that, you can expect a big delay before you actually "need" to upgrade.

Spend wisely  

I don't really intend to buy blindly - if the benchmarks don't show a marked increase in performance, I'll have no reason to go with the chip at that price level. However, the LGA775 socket is going to be a thing of the past. Both Bloomfield and Westmere (which will supersede Bloomfield in ~2010) use LGA1366, while the 'mainstream' chips will be using LGA1156.

If I build now, my next upgrade will have to be new CPU, mobo, and memory; if I build after Core i7, I can just replace the CPU.

third option: lga775 + ddr3 + ddr3-enabled mobo. Only have to change cpu+mobo.
My guess is that with a good lga775 build, you could be able to leapfrog the next generation all together.