It's almost 100% confirmed that the Zune phone is coming. Crunchgear had a tip this morning that says Microsoft execs are working out the details of the device today, and are planning the date which the Zune Phone will be released.
Our own tipster confirms this. He says that it probably will NOT be running Windows Mobile (thank god), and is on track to be released late this year. It will be compatible with both Zune Marketplace—whether that means downloading on the fly, we're not sure—and Xbox Live. The latter means there's most likely going to be Live Anywhere implemented on the phone.