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All I can think of is smaller bezels, 3D Touch, a9x or a10x, 4gb of ram, lighter and longer battery life.

Add second gen Touch ID to this (which hopefully is a given) and I'm right with you. A flash would be nice as well.
 
Pencil support would be good

Not sure if they would do that though
I don't know. I think it would be a good move. It will allow Pencil apps to be run on a wider install base and then if people need more room cause them to consider the iPad pro. And perhaps justify the purchase.
 
Pretty happy with my Air 2...

I think it would have to get a resolution bump without taking a hit to the battery and likely an increase to 3-4 GB of RAM, as I'm looking to probably keep the Air 2 for another 2+ years. Having the battery life go back to what it was on the Air 1 or better would be nice, without having to make it bulkier or heavier.

3D Touch would be a boon too. I never had issues with missing Touch ID on my Air 1 or Mini 2 back in the day even though I owned a 5S and a 6 Plus, but I have (surprisingly) found myself trying to use 3D Touch in Mail or on links in web pages on my iPad for "Peek and Pop" so that's something I'd like to have.
 
Parity with Apple's cutting edge SoC's. I am not prepared to pay today's frontline pricing for yesterday's technology.
 
Reiterating what others have said, all I want is AMOLED. That would be an absolute deal breaker for me.
 
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