I don't think there are any 5mm (which is the height of the drive used on the 120GB classic, regular 1.8" hard-drive have 8mm height) larger than the current 120GB. And we know Apple's obsession with thinness, so I don't think they will bring back a thicker classic just to up the capacity.
Couple things that may happen.
1. Keeping the same 120GB, adding voice over. Really, Apple cannot do much on the classic. I don't see Toshiba releasing higher capacity 5mm height hard-drives than the current 120GB. Plus, Apple's obsession with thinness made them discontinued the thicker Classics last year, so I doubt Apple would bring them back. Price cut might happen too, dropping the price to, let's say, $199 to $229. Really, not many competitors here other than the Zune 120, so Apple might as well keep the same $249 price point.
2. Discontinue it altogether. Apple might just decide it's time to truly focus on the iPod Touch, and the oddball Classic pricing was in the way. This might irk some people desiring high capacity players, but I don't think the majority of the consumers would be bothered. I doubt the sales of the Classic is that great, as the big sellers are the Touch and nano.
3. Make a flash based Classic. Really, this is my wish. As much as I love the 3G nano, its controls are just too small. I love my 5G iPod, but the hard-drive prevented me from using it on the go. Maybe a Touch Classic? It will have a full touch screen like the iPod Touch, but with the stripped down OS, focusing on the iPod capabilities (no safari, no app store, etc). Price and capacity, maybe 16GB at $199, and 32GB at $299. Imo this is highly unlikely though, as it is really overlapping with the iPod Touch, and Apple usually prefer a clean lineup.
Well, it's sad to see high capacity hard-drive based players are going away. It wasn't that long ago we have hard-drive based Creative Jukebox, and the original iPod. Flash memory are just more reliable, and their pricing continues to go down.