I don't see this as being too terribly far fetched. It appears that the part cost (for Apple) would be only about $50 more than the original display. It also seems reasonable that Apple may have been able to improve some of their architecture to reduce cost elsewhere. Further, as NAND Flash prices are notably lower now than they were a year ago (as much as 50%, according to one site I found), seeing models with 32GB, 64GB and 128GB doesn't seem out of the ballpark, either.
In any event, I don't know. I'll almost certainly be happy with whatever Apple comes out with. (For those who would call me a fanboi, or an Apple apologist, I'll say this, of course there are things that would disappoint, but if Apple gets even halfway to where these rumors are pointing, the iPad 2 will be a fantastic machine. After all, the iPad is a fantastic machine, and all of these would simply be improvements on it.). I look forward to upgrading to the iPad 2 when it comes out. Thereby hangs my biggest want... release it sooner than later!