Next-generation iPhones likely to focus on internal improvements.
Apple Seeds iPhone 2.1 Firmware with GPS Features
According to the site, Apple has included new Core Location features that might suggest that turn-by-turn GPS could become a reality. Core Location can reportedly track your direction and the speed at which you are traveling.
Along with the new firmware, Apple has also seeded a new version of the iPhone SDK but the new SDK can not be used to submit Apps to the current App Store. There have been earlier reports that Firmware 2.0.1 had been spotted in the wild, but a 2.1 upgrade would presumably introduce more than just bug fixes.
Update: Besides Core Location speed and heading additions, Apple has also included early Push Notifications APIs that allows applications to process notifications in the background. Apple promised this feature by September.
Note: The seed is only available to registered iPhone developers who were accepted prior to July 11th, 2008.