iPhone Mini?

A new rumor has arrived on the Internet that Apple is working on a "mini" iPhone much like they did with the iPod.

I find a few problems with this. First, the screen would have to be smaller and one of the best things I like about the iPhone is the size of the screen, it's just right. Second, there would have to be an actual keyboard built into the device which seems unlikely considering the fact that Apple always pointed out the advantages of a soft keyboard in there keynotes. Third, the internals would probably be that of the iPhone 3G and battery life would suck since they have less room to work with. Speaking of which, the device would be pretty thick too, which Apple doesn't like.
Ultimately, I think this rumor is just about Apple testing different things for the iPhone in the future.