Well, this was to be rather expected wasn't it...
Developers have been digging around in the iPhone OS 4.0 SDK over the weekend and have found all sorts of coding hints about the next Apple handset. The big ones: video conferencing and a camera flash.
Buried deep within the 4.0 SDK are multiple references to video conferencing (as shown above) suggesting Apple will finally bring a second front facing camera to the range. Chat rooms, moderators, encrypted conferences, etc are all mentioned in the code alongside notification messages similar to that of iChat on Mac OS X meaning a mobile version of the popular IM could be on the horizon.
Backing this up is evidence from TUAW which has discovered reference to 'iChatAgent' in the running processing in the SDK alongside 'AVCaptureDevicePositionFront' and 'AVCaptureFlashModeOn/Off/auto' signalling perhaps a camera upgrade and integrated flash.
Personally I can't say I've ever hankered after video calling, but those who do use it swear by it and it would undoubtedly be more efficient than the usual process of snapping something, emailing it and then calling that person to discuss it. A better camera would also be extremely welcome and long overdue.
Before everyone gets too excited though, remember code references don't nail down new features merely show that they have been in the minds of the company. Notably in recent times both the code of the iPod touch third generation and iPad have suggested they'd be equipped with inbuilt cameras and while these are likely to appear in their next generations they didn't make it into the products we got.
That said, I'm cautiously optimistic.