Here's a question: If you're building a video-capable successor to the wildly successful iPhone 3G and you choose new hardware that supports 720p-resolution video recording, then why do you cripple it to just VGA resolution?
It's an interesting question because that's exactly what Apple has done. The discovery was made by Rapid Repair, which got hold of a newly-on sale iPhone 3G S at midnight in Paris, and wasted no time tearing it apart to find out what its internals were like. The answer is that they're extremely similar to the iPhone 3G, which may be no surprise when you think that the 3G S is an evolutionary step up from the 3G, and even has identical screen tech and housing for the phone.
Except for the new camera and-updated processor, of course. Which is where the interesting 720p capability comes in. The camera shoots 3-megapixel stills, and thus could be commanded to shoot 720p video--it's got more than enough pixels to spare, and the speedier 600MHz processor in the phone should be easily capable of the increased bandwidth required by 720p video. Why has Apple chosen to limit it to VGA resolution? It seems a slightly odd move, given that there are smartphones out there that shoot still imagery at 12-megapixels and can do full HD video.
The answer is a mystery, but we can guess one probable cause. It's the same reason why the 3G S's new processor, which is capable of 833MHz speeds, is choked down to just 600MHz: Battery life. Apple's aware that the iPhone's battery is a bit small, and protects the battery performance as much as possible--its quoted as the chief reason there's no background app capability on the phone. 720p video recording and a faster processor would just eat into the battery a whole lot more.
And the reason the battery is limited is that Apple chose to stick with the same iPhone casing. If Apple would've adjusted the physical design of the phone, Apple could've easily included a bigger capacity battery. This seems to be one of those strange moments when an aesthetic design decision has squashed the opportunity to sell the iPhone with a killer feature: HD video recording.