It will definitely not be upgraded to 16gb. No way. The 8gb iPhone currently costs the same as the 16gb touch. If they upgraded the iPhone to 16gb then they would have to increase the price which they never would do. They could not have the same price for the iPhone and touch.
True, Unless they upgraded the Ipod Touch to 32 Gb, and the iphone to 16Gb. If the costs allow it, then they could keep the prices the same and therefore the value points of each on par to current standards.
There have been a couple rumors by analysts who have looked at supplier's trends who have hinted at an early 08 capacity increase, and 3g in the second half of 08. Yet what to consider is, the question of would they upgrade both , within the 2 weeks after Xmas.
My wife bought me an ipod Touch 16GB, instead of the iphone due to capacity(she couldn't keep it a secret for longer then an hour). I have yet to open it, and she said she was told I had two weeks after Xmas to return it.
SO my personal debate is, would they increase capacity right after Xmas, and within the return time frame, or not change either.
My hopes is they will increase both capacity wise by 2x. And announce the 3G iphone for June, since as it has been pointed out the FCC filing will expose the new iphone anyways. But I can't deny the thought they could shoot themselves in the foot, if they made those changes. Granted I don't' have details on the storage chips, or current related costs for them. But then again that is why I am trolling the rumor sites, and forums to find a hint of what SJ's got up his turtleneck wearing sleeves.