Hmm, did James have some insider information on an Apple handheld computer or was he just being a good psychic? There have been rumors and dreams of an Apple ultra portable computer for years. I still have my Newton MessagePad 2100 and think my iPhone fills many of the roles I wanted in an Apple mobile device. According to the Apple Insider we may actually see this device come out in 2008. While this may just turn out to be another rumor that doesn't come about, with the iPhone and iPod Touch showing that multi-touch works well and more and more ultra-portable PCs hitting the market it may be a ripe time for Apple to lead the way into ultra mobility.
The rumored device that engineers are supposedly working on may use an embedded OS X operating system with a display resolution of 720x480 and be about 1.5 times the size of the iPhone/iPod Touch. I think if Jobs is planning to roll something this major out in 2008 then we should see it revealed at MacWorld in January.