Engadget has it on good word that the 2nd Gen iPhone will have 3G and proper GPS. Here are several other observations they have found.
* The first thing people will notice: the 2nd gen iPhone will be about the same size and shape as the first gen.
* It will, of course, have 3G. And proper GPS!
* The most noticeable physical difference is back of the phone is no longer metal -- the whole thing is glossy black, from top to bottom. The volume buttons are now chrome.
* Because it's got a little less metal to deal with, it doesn't have quite as many angular edges. The battery is (still) not removable.
* The phone itself will be slightly thicker than the first gen device.
* The headphone jack will no longer be recessed, and will finally be flush with the body.
* The device itself uses roughly the same size and resolution screen as the first generation product.
* No solid word on battery life or capacity.