It always stuns me to see how these threads heap one feature and wish after another onto whatever basic rumor is presented to them. In this case, any speculation should start off from the existing digital appliance: iPod. It has a harddisk, a reasonably fast processor, some RAM, a small lcd-screen, a battery, and a fast connector-cum-charger. The simplest way to make it into a different kind of digital would be to make the screen larger and extend the software. You still don't have a PDA; to make such a one would take too long to develop and put it in too high a price range for the present, depressed PDA market - the touch screen is far more expensive than the present tiny screen, and the necessary software too complex to develop in a jiffy, even from the venerable Newton code (which, after all, has a completely different code base from the iPod OS).
A larger, full color screen and some fairly simple extensions (reworked from QuickTime) will give Apple a convergence appliance with the following kinds of usage built-in: replay of sound files, digital recording of sound, slideshows of digital photos, and showing - with software on the Mac - of notes, databases, anything to do with text. The present CPU is probably not fast enough to show movies, but I might be wrong on that one.
This device will not send rockets to the moon, but it will have enough extra features to make buyers accept that another $100 is added to the present price while making the price of the extra hardware and development feasible for Apple within such financial restraints. The extra features parallel some of the digital appliances forecast by Xerox and IBM many years ago.
If there is one lesson to be learnt from Apple's introduction of hardware in the last two years, this is it: while the development cycle of existing products is fairly short, new products take far longer to introduce, and are far less revolutionary, than the Apple press expect - and there are far fewer of them than the pundits hope for. To wit, the iBook, the new iMac and the iPod. The one totally unexpected and revolutionary hardware item was the Cube.....