It took about three years to get all the features in your bulleted list. It's been another fifteen and a half years since.

Touch/faceID is cheap, wireless charging is cheap, the free tier of iCloud is cheap, water resistance is cheap.

Yes the specs have increased a ton. When asking for a model under $500, the idea would be giving up some of those specs. And that's clearly possible; even low end phones these days are a zillion times better than an original iPhone.

And no I will not look at non-iPhone things when I'm evaluating whether iPhones underwent a hefty price drop. The cheapest iPhone these days is slightly cheaper than a first or second generation iPhone, and the best one is a lot more expensive.