The biggest problem with the i5 is that it requires an intel integrated graphics chip, which is apparently a terrible gpu. The larger MBP and iMac got around this by also including a dedicated gpu, but there simply isn't room in a mini for that. This is why Apple had Nvidia cobble together the 320m.
I always hear this 'space' argument. Before the 2008 mac mini came out and there were rumors of 5 usb ports, several people said it must be a fake, because "there is not enough space inside the mini to support the extra ports".
Here we go again, "not enough space for a dedicated gpu".
That's what engineers are for: they can re-arrange things, reconfigure, pack things in different, more creatively. Just because you can't identify the space needed inside the current mini doesn't mean they couldn't 'make' the space with an internal redesign.
That said, I agree that the mini likely won't have a dedicated gpu. Not because of space but economy. The mac mini has always been meant to be the 'economy' mac, and it's specs have always been in line with the macbook (and the ibook before it) and NEVER in line with the macbook pro (powerbooks).
Personally, if they made a mac mini with the same specs as the 15" macbook pro, I'd be all over that thing. And yes, I would pay the $1199 or whatever it is that such a specced machine would run.