Slight disagreement here: the char-gen and enough other basics for players to play go in the PHB. All the rest (except for monsters) goes in the DMG: this represents most of the meat-and-potatoes of the game. In an ideal world the PHB isn't much bigger than a standard adventure module while the DMG is as big as it needs to be.
If the rules for play that are used by players are in the PHB, I'm good. To me, it is:
PHB: Stuff that players need to reference - multiple copies bought.
MM: Big list of monsters, because we like that kind of thing, and it is traditional now.
DMG: Everything else needed to get started, mainly being adventure/campaign and running the game aids and advice.
Don't put prestige classes in the DMG. Don't put optional rules in there (that players will reference if used). That is, don't put things in the DMG merely because they are optional. If it is that big of a worry, put a big bolded, 18 point note on page one of the PHB that says optional rules may not be used, at the discretion of the group, and the DM may have a big say. It's using presentation division to "shield" the DM from having to make that decision, but it is ultimately self-defeating. Players will read the DMG--or more likely, will read a message board post from some player who read the DMG.
I like Steeldragon's idea on the monsters being in the DMG. But given the ambivalence about the magic items being in the 4E PHB, and that the list was so paltry due to space, and that they want to sell books, I think a better breakdown might actually be:
PHB: All the reference material on characters and advice/rules of play that players need to know. Have a default campaign world, and include a "Players' Guide" for it, complete with gods, map, etc. Helps the new players get cranking right away, and even experienced players not using it can see it as examples of the kinds of things they might like to know.
Keep the page count low enough that a soft-cover option is available on later printings.
DMG: All pure DM stuff--running the game, adventure/campaign advice and aid, sample adventure set in that default campaign world, detailed example of how that campaign world and adventure were designed. A good sample of monsters and magic items that have twists or surprises related to them, compromising about half of this big book.
Monster and Equipment Guide: About half monster manual, with the more common beasties that people have heard about, mounts, and a few oddball things that are still fairly common. Also include common magic items, including enough samples of each type to teach players how they work. Put in all the mundane weapons, armor, and huge list of optional equipment (10' poles et. al.) that some people like to use.
Possibly rename the third one.

The idea, it is a book that you only need one of in a pinch, but you really could use a few extra copies. It's all the stuff that is on the border between "everyone needs it for sure" and "only the DM should read this."