Let's face it, Apple doesn't want to be in the position where consumers expect them to fundamentally redesign the phone every year. That's a lot of work for a design that doesn't last that long at the high end. Plus, each redesign means it's harder to top yourself the next time around. Just look at how the iPod Classic line has stagnated so much over the years to the point it's not even mentioned during keynotes anymore.
Apple has already proven that there's such a thing as overdesign when they created the 3rd generation Shuffle. It had no buttons and could only be controlled via voice, frustrating users. It was hated so badly that the 4th generation was basically a 2nd generation Shuffle with new colors.
The actual design of the hardware can only change so much. For example, I don't think we'll ever see any more significant camera updates in new iPhones worth talking about. What would be better than 8MP stills/1080p video recording that would be
reasonable to stick into a phone? The future of the iPhone platform is iOS itself because that's where real innovation can happen for several years to come.
Lastly, I want to point out this
MacRumors story from January. If you remember the video, the steel frame is
exactly what's used in the iPhone 4S with the same positioning of the antenna separators as well as a micro SIM card slot (something the Verizon iPhone doesn't have). That would indicate that the final design of the iPhone 4S was ready at least 9 months ago. If so, the leaked "iPhone 5 designs" were likely very early prototypes of next year's hardware design. If such a design leaked a year before release, it would really get Apple into a tizzy because there would be ample amount of time to copy the design before its release (thus Apple has involved the SF Police and gone to great length to go find it ASAP). You have to admit that looking back, this scenario makes a LOT of sense.