According to sources outside Apple who are familiar with iPod hardware and software development, Apple already has plans for numerous iPod updates and variations, up to and including video playback capability with a color screen that will cover almost the entire front face of the iPod. However, the more immediate revision will be relatively modest -- storage capacities of up to 60GB, a new enclosure with more customization options, an entry-level price tag of $199 for the 5GB model, and at least one of the following: AAC/AC3 audio playback support, direct audio recording support with a built-in microphone, and greatly increased integration with Apple's iLife/iApps software suite for smooth workflow on any number of host computers when you connect your iPod.
The update is not affixed to any firm schedule now; Apple is waiting for the strong stock of existing iPods to clear out of the distribution channel before announcing new models. Right now Apple has January 25th tagged as a possible release date, but that is rapidly becoming less likely according to new recon received by Rumors today. We now think it will come either in early February, or along with the 15-inch Powerbook/Xserve update we described above.