See, I think that something is fishy about that image (it just looks all kinds of fake - but who knows, it could be a legit ad mock-up with incomplete images), but seeing as I trust ThinkSecret far more than these 9to5Mac people, I think the most likely possibility is that this will be similar to the new design for the new iPod itself - not for the nano.
Hard drive form factor is really the biggest issue and I'm not sure they can get the 1.8" drives into anything smaller -- but perhaps Apple is planning releasing a flashbased larger iPod?
It seems odd that the Nano replacement would be so much wider (if the pictures are to be believed -- of course it could be slightly larger than the shuffle and have a screen) -- the width is one of the aspects that really sells the device, and the length is inconsquential.
Very, very interesting.