The reason a phone is cheaper with a contract is that the contract offsets some of the pricing. You being locked into a contract for X amount of years helps pay for part of the phone. You are basically paying for the phone for 3 years. If you want it by itself without a contract then you want it unlocked. Unlocked equates to it being well over $500.
If you cancel your contract you are probably going to have to pay out the remainder of your contract and some fees, is it worth it just for a phone? Probably not. There's nothing wrong with what AT&T told you, that's what it is for any service provider. Like you said, Apple is offering it for $200 WITH contract.
See what Dismal was trying to explain? So to sum it all up, it's impossible to get a new iphone for $200. Even if it was stolen and such, the bootleggers won't sell it for that low because they can definitely get it for more.