GPS - this is possible, but unlikely. The iPhone uses a combination of 3G and wi-fi to locate your position with the GPS chipset, so it probably isn't going to make it to the iPod Touch, as it would rely entirely on wi-fi to be of any significant use without dramatically increasing the size of the device. in order to self-power in the way an in-car GPS unit does Again, GPS is largely a mobile technology, or in-car. Apple would damage the iPhone sales if they were to cross over too many of the phone-only technologies to the Touch.
I don't agree with this at all. GPS is perfectly do-able in a Touch if the case was rejigged slightly. I really don't understand the argument that so many seem to try and make that GPS is inherently tied to the iPhone. All the Touch would lack is the assisted part of the iPhone's AGPS. Sure GPS would be thirsty on battery power, but then so is Aurora Feint, and plenty of people seem to happy with the app store.
A Touch with GPS plugged into a car's docking system gives Apple a whole new angle into the GPS market, and increases the likelihood of cars coming equipped with iPod docks. Since MS is making in-roads into the auto industry, Apple would be foolish if they didn't at least give the possible market muscle of a GPS equipped iPod Touch some serious consideration.
And the balkanization of iPhone features argument doesn't really hold either. Until such a day as the Touch comes equipped with a microphone, and external speakers, it'll never eat the iPhone's market. People aren't buying the iPhone to get a Touch with GPS and a crappy camera, they're buying them to get a phone. That's it. That's the product distinction. One is a phone, the other isn't. They could overlap entirely on features aside from that point, and it wouldn't affects the sales ratios one iota, 'cos people who want the phone will buy it, and people who don't will buy the Touch. So unless the Touch can makes calls, or at the very least, use Skype, it's in a wholly different market than the iPhone.
Memory upgrade - possible and quite likely. However, the 32GB memory in the iPod touch is 2 x 16GB flash drives, not 1 x 32GB drive. To go up to 64GB, you would need to put 4 x 16GB drives inside the case which would make it bigger and heavier - or have two (expensive) 32GB chips. When teamed up with a case re-design to match the iPhone, this might not be such a crazy idea. However, Flash memory is expensive at the moment, and it would significantly increase the price of a Touch if the memory jumped up. If the 8GB model vanishes, it means that Apple would have two memory options on the Touch (same as all the other models), not three, as it is at present. A memory increase is probably the most likely change, but I still reckon it's not going to happen until well into next year.
Memory is the wild card on the Touch. On the one hand, 64GB looks like a winner, but 4x32GB leaves Apple very little room physically to add features, and 2x32GB probably pushes the margins such that the cost of new features would be prohibitive.
I'm going to go with 64GB or GPS, but I certainly agree that we are unlikely to see both together.
That said, Apple's buying power is pretty good at this point, so they could take a speculative hit on 32GB modules, and drag the market behind them.
Either way, if GPS doesn't happen, it wont be because it can't, or because it lacks utility, it'll be purely because Apple chose not to add it.