The lack of compass has really been bothering me. Not so much because I need it now, but as a developer I know that the compass is the missing link. Once they incorporate it, some really awesome things can happen.

The screen is kind of a touchy issue (no pun intended). I would like to see a higher res screen, but it could lead to some backwards compatibility issues with some current apps. If apple can get around this and incorporate an even slicker screen into Iphone generation 3, then hats off, and wallets to them.

There has to be something else though, something physically obvious. See people just got their 3G iphones a year ago, and they spent a lot of money to do it. Beyond function, the new iphone has to be noticeably different from past generations if Apple wants people to upgrade. I think that in keeping with their current direction the new iPhone may have a brushed aluminum casing.