Phone for development?

It would depend what type of App you will be developing.

If your app is going to be along the lines of Infinity Blade II, then you will need an iPhone 4S, but if your app is going to be something like DoodleJump, then an iPhone 4 is good enough.

 

Yeah, it totally depends on what you're writing. There's a lot to consider:

- A 4s is much better to test on, because the a5 makes it much quicker (quicker install, quicker app start, quicker in-app for testing). That saves you a lot of time when you're testing on the device.
- A 4s will hide performance issues. If your code is too slow somewhere, it might run fine on the 4s but dog slow on a 3g. The end result is that you end up with a bad app and lots of complaints.
- Maybe you do 99% of your testing in the simulator and the whole question is irrelevant (I don't have this luxury )
- Both 4 and 4s are retina devices. Do you need to test on a non-retina display?
- Do you need to test on older iOS versions? That makes things tricky! How about beta iOS versions?

Ideally you need a testing suite, with all the major iPhone and iPod versions, running a range of OS versions, but I guess you need to compromise a little Personally I have a 4s for main dev work, and a 3gs for compatibility testing (none of my recent work will run on 3g or older, so that's enough).