In the current episode of the Diggnation podcast, Kevin Rose confirmed speculation that the iPhone is a sure thing for release next month, presumably at the Macworld Expo.

In the audio (embedded below; beware of drunken profanity), Kevin clearly has the inside scoop. (Unless he's a dupe that someone at Apple is using to spread misinformation to head off speculation.)

Features:

• Compatible with PCS, GSM, CDMA networks (unlocked?)
  
• Very small
  
• iTunes-compatible
  
• Separate batteries for phone and music player
  
• "Cool" OS
  
• Two sizes: 4GB ($249?) 8GB ($449?)
  
• Slide-Out Keyboard
  
• Possible touch-screen
  

Despite the small capacity, this could be FreeiPodGuy's next "iPod". I use my iPod mainly for audio podcasts nowadays, so 4GB would cover me, and I'm getting a little tired of carrying around my iPod AND my phone. FreeiPodGuy has always been skeptical of efforts to combine devices gracefully, but if anyone can do it, Apple can.

Here's an audio excerpt from the show: