Hardware
2GB RAM
128GB (32GB entry)
Better camera
Thin bezels
Software
Widgets in the Notification Center
Integrate Spotlight search into notification center - put it on top
Set Default apps
Delete/Hide stock apps
Data usage monitor
Multitasking gestures (Zephyr)
Camera.app needs Timer, time/date/location imprinting, stabilization shot, 720p @ 60FPS recording option, White balance, Exposure, Light sensitivity(ISO), Contrast, Sharpness, all of these should be added.
Maps - Drop more than one pin on the map, route between them
Delete photos from Photo Library
Being able to view file information in photos (say date of taking etc)
Prevent shut down when the phone is locked
Delivery notification for normal SMS messages
Snooze time configuration option for alarm, (amount of snoozes, time in between)
Calendar events in Notification Center/Lockscreen - Configure look at head
Calendar event badges on calendar(with an ability to adjust how far in advance you can see your events, 24hours, 7 days, 14 days, etc..)
Birthday's in Calendar - show how old is person is turning into
Pictures in the Notes.app
Safari - Tap and hold the tabs button to show closed tab history
Smart Playlist creation on the iPhone
iMessage - Needs an ability to share location(Map) like with WhatsApp, right from the iMessage. Current you can only send photos from iMessage, but Maps and Contacts shortcuts should be added too. Also it would be great if the image EXIF data was preserved when sent so the receiver could "open" that image in Maps and navigate... quickly snap a picture of a location, send it, the receiver gets the image, taps "Open in Maps" and finds the route to you.
iTunes:
Drag and drop(manually manage) pictures, ringtones(you can drag and drop a ringtone now but only one) without the need to sync.
Pick Audio output card