I am trying to implement alternate layouts for both the iPad/iPhone and older iPhones as well.
I have established that the best method is to use @media
I'm not sure I follow your question. Did you try your queries on the iPhone 4? device-width
is measured in logical pixels, not physical ones, so the iPhone 4 still fits the max-device-width: 480px criteria.
Same goes for high-end Android smartphones, which have a pixel ratio of 1.5: the Nexus One has a physical screen of 480x800, logical screen of 320x533.