“Inside Steve’s Brain” author Leander Kahney of Wired magazine is reporting a programmer source inside a major software house has revealed that the next generation iPhone 3G will thinner — we’re talking Paris Hilton thinner — by a whopping 22%.

Not only that, it will sport better battery life than the already impressive 8 hours talk time of the first gen model, and twice the NAND flash capacity, topping out at 32GB. (Paving the way for 64GB iPod Touch’s?)

Still not enough, echoing Kevin Rose (historically not the most reliable of iPhone prognosticators), Kahney thinks the phone may be heavily carrier subsidized — down to the $200 level in some cases — in an effort to put the hurt on Blackberry.

Okay, fess up, who left the rumor mill jacked up to max?!

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