My improvements.
Same retina display, (maybe oled backlight)
slightly faster processor.
Lock screen utilised.
a square home button closer to the bottom allowing more screen size.
Dedicated camera button (You can not turn on the camera from this button. You must open the app, as when i had a dedicated camera button on an older phone it always opened the camera unexpectly and took photos in my pocket.)
Better speakers for ipod etc and a better ear speaker.
Curved design again and the square design is crap on the iphone 4 because it doesnt sit in your hand well.
Sim tray on top again.
Headphone jack at the bottom.
2 speakers for watching youtube (ipod etc) so you hear it from both ends of the phone.
Stereo sound quality (louder speaker without distortion).
User interface made like mac osx with the folders on the springboard. (see attached photo for example)
Make it so the folders have no app limits. so i can have 40 games in 1 folder if i want.
Keep the black and white theme, its not a toy its a phone, no need for red black orange green blue purple.
Better front camera with flash.
8mp camera with quad led flash for the back.
Facetime is gay, video calls so you can talk to anyone on a cameraphone for a video call.
Faster startup and shut down.
Unique battery saving technology and lithiom ion battery (like in macbooks)
So you can set how long you need it to last for in the ui and the phone will make power cuts etc to make sure you last the day so for example if you forget to charge and only have 30% battery and need it to last 8 more hours. select 8 hours and the phone will do its best to utilise power, backlight brightness and backlight timer to save battery.
budget 16gb, ($350AUD) moderate 32gb ($450AUD), extreme 50gb ($550AUD)
100gb ($700AUD)
Antanne fixed and bigger allowing for better reception in remote areas.
Telstras tick approval for it.
Custom SMS sounds.
Ability to delete, rename and add new songs from your iphone and when you sync it automatically adjusts on your computer (ratings etc etc).
inbuilt fm tuner for cars.
Bluetooth that works for any device so i can recieve a song from a friend with a htc or droid etc.
Like others have said kill all multi task apps.
remove the stocks and itunes or whatever you dont use and hide them directly on the phone.
Contact name input made easier.
Safari updated (always seems to lag to open pages and seems to lock up the phone)
an extra 1.5cm on screen for easier texting for people with larger fingers.
a screen that doesn't scratch easily, the new glass is shithouse.
better notfications that dont allow people to read half of your message on the home screen.
Thats all for me
Not saying i dont love my iphone now but i think apple is falling behind and is more worried about how cheaply they can make it to get max profit then providing people with up to date features, like come on video calling was around 4-6 years ago.