I think the OP had a great post and eventually probably most of what you wish will happen, but Apple is all about incremental improvements. Below is a quick list of what I think is likely what will happen. Before I get to that let me say, I have a friend that works in the industry at RIM who is very knowledgeable about the ins and outs of the industry. When I asked him a few months ago if 4G was possible by June on iPhone he kind of laughed it off and said "Yeah maybe if they waited until this fall but summer it would make them look stupid." Sure enough a few months later we are getting a lot of these rumors that Apple may actually be waiting until September which makes more sense. Here is just my quick list of predictions:
-iPhone "4G" or "5" as the likely branding.
-4G capable with a base price of $200
-Comes in 2 main flavors on Verizon, AT&T, possibly Sprint (as could be another reason waiting until fall) at $200 32GB, $300 64GB (or 16/32 I say the memory bump would be a 50/50 thing honestly) with black or white
-iPhone 4 now only 16GB (or 8GB) at $100 on both Verizon and AT&T
-Cosmetically little will change
-Main feature Apple will focus on most is the camera, 4G, and Facetime over network, and the fact that it will do it over any network and device. Due to 4G they may raise the fees again.
-The camera on the back at least will greatly improve being the 9MP Sony sensor rumored/confirmed possibly with 1080P
-4' screen could happen but it would have to not sacrifice the industrial design, and would have to scale in accordance with applications from developers.
-Innards will consist of the same graphics and cpu as iPad 2 with a 1Ghz dual core. Memory however will be bumped to 1GB (just as was the case with iPad 1 being 256MB ram, iPhone 4 being 512MB, etc)
As for iOS5 I dunno. I would suspect something to do with the cloud, better push, better notification system, a "personalized" Home screen similar to Android but done in a very Apple way. Perhaps more improvements towards true multitasking, I would suspect an "Apple TV app" could be in the works. An adapter and/or compatibility with Thunderbolt as well.
As for the OPs hopes of it comparing spec wise with Sony's NGP/PSP2 there are key differences in how each business works, and likely Sony will take a profit hit the first year or two the NGP is released due to how expensive it will be and Sony cannot sell it subsidized. Technically, the graphics in both aren't much different from a technical stand point of view:
NGP: SGX543MP4 (four cores) 134M polygons/s, fill rates in excess of 10Gpixels/sec @200 MHz
iPad 2 (presumably iPhone 5): SGX543MP2 (two cores) 67M polygons/s, fill rates in excess of 2Gpixels/sec @200 MHz
Not only that, the iPhone has a 3.5' screen @326ppi while the NGP has a 5' screen @220ppi, meaning a NGP game would need more power just to make the bigger area have near PS3 quality visuals at a lower ppi than iPhone has.
From the tech specs side, presumably the CPU is a four core 1Ghz Cortex A9 but who is to say it isn't underclocked or just 800Mhz to begin with? Not only that, unlike Apple's dual-core architecture, Sony intentionally will lock out one of the cores making for the same awkward (but not nearly as frustrating) asymmetrical design challenges found in PS3.
I would say it is a safe bet though that within the next two years, iOS devices far outperform the NGP.
Great post. I think you'll get all of your predictions met.