TiPb predicted an iPhone HD way back on October 10, and while not everyone -- even here -- agrees that we'll see it, rumors continue to point that maybe, just maybe we will.
The latest comes via PhoneNews which reports that the Apple AV Cables, component and composite versions of which were launched last year alongside the iPhone 3G, are being cleared to make room for a consolidated cable. What's more, this new cables, alongside an "iPhone HD" would support 720p or 1080i out (for your TV, not on the device itself).
A wilder bit of rumor postulates on an HD-out iPhone or iPod touch replacing the Apple TV. I'm not sure I see that happening. I use the current AV cables all the time when visiting friends and family, but tying my phone to my own TV wouldn't be anywhere nearly as convenient. Buying a second, iPod touch class device wouldn't really be cost effective compared to an Apple TV either, though would multitask better if you ever needed a second traveling device, I suppose.
If the iPhone itself gets a higher screen resolution as well, 480p (800x480) similar to last year's HTC Touch HD would be the max we'd like see (or need) on device. HD aside, web browsing with that many more pixels would be very welcome.