Talk about a single, branded GPhone more or less died down after the announcement of Android, but it seems that you just can't completely kill a good rumor. According to TechCrunch, an Android phone made by Google may actually become a reality, based on two new bits of information-the first being a quote in The Hollywood Reporter from a press conference with Larry Page, Sergei Brin and CEO Eric Schmidt. Update: Silicon Alley Insider says the quote is actually inaccurate, noting none of the other major news orgs there picked it up.
The reporter noted that "The trio of Google execs also used the opportunity to talk about the inroads the company is making with its own branded mobile phone as a replacement for the iPhone." [That appears to be a mix-up by the reporter, with Sergey and Larry actually talking about not producing their own phone, according to Reuters's Ken Li's notes in SAI.]
But, TechCrunch does have its own source, who "swears" that the Ammunition Design Group "is designing the Gphone and that it is a seriously beautiful device." They've worked with companies like Palm, Hewlett-Packard, Dell Computer and Logitech in the past (a phone they designed for Sprint is pictured above). Not a confirmation by any means, but TechCrunch usually has decent info-so take that for what it's worth.
The more probable explanation for any sort of design work on a handset for Google is that they could be prototypes for marketing or other promotion-no one can make the call whether it's for production yet. [Tech Crunch and Mediaweek via BGR, Silicon Alley Insider]