As I said in my post about this last night in the "E3 Predictions" thread, I don't really care if it is smaller really. I would however like to have a quieter and more reliable 360. The wifi built in is welcome, as would be the possibility of the built in power brick.
One thing that I would really like to see with this new one is non-proprietary user upgradeable hard drives. MS is already moving away from their proprietary memory units now that you can use a USB flash drive for storage. It would be nice if the hard drive followed suit. Sell it with the built in 250GB drive, but then, like the PS3, if someone wants to upgrade, let them use whatever drive they want. I have the 120GB drive with my Elite now, and it still has over 30GB free, so I'm not really short on space or anything, but it would be a nice change.