Return of the iPhone Nano Rumors

With Macworld fast approaching, the rumor rate should begin increasing exponential. iTablets will be hot once again, of course, as will the iPhone Nano. Says MacRumors:
[iDealsChina] claims the product will be announced at Macworld San Francisco 2009. iDealsChina, however, has a very mixed track record. In August, it passed off renderings of knock-off iPod clones as the real thing and also claimed that the new iPod Touch would have GPS (it did not). The site, however, did previously have access to Griffin case moldings that appeared to be real. The sizes could correlate with smaller touch screen photographs that iLounge published in June.
MacRumors thinks such an iPhone Nano may break App compatibility with the existing iPhone and iPod Touch due to screen size and resolution. Shrinking the screen down using a higher DPI, like the iPod Nano would lessen part of the problem (though hitting tinier capacitive touch targets would no doubt be an interesting exercise in frustration).
What do you think? iPhone Nano for Macworld? And is it a Good Thing?
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Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.