Theres a lot of misconception going on here, so I guess I'll clear it up.
That picture saying that the Xoom will be $1,199.00 was just used as a temporary placeholder on the best buy website, people weren't supposed to see that. The Xoom will sell for $799 + mandatory carrier fees on Feb 24th at Best Buy and Costco (there will also be a $35 rebate on the Costco price which covers the first month of carrier fees). The Xoom is a very atypical mobile device sale--although you have a mandatory data plan when purchasing the Xoom, you are allowed to cancel the data immediately after the purchase (though still paying the charges for the given month you are on). This is why the price of $799 is NOT a subsidized price, in fact it's just the opposite, it's an augmented price of it's actual value.
A Wi-fi only Xoom has been confirmed to sell for $600 sometime at the end of Q1 (March or April).