On a different note, what on earth are they going to do with the next Rebel in spring 2012 if they haven't released a 7D MkII. Surely they can't simply produce another minor iteration with the 18MP sensor, what worthwhile addition can they make that doesn't take it into 60D territory? Maybe they're planning to introduce the new APS-C sensor on the 650D.
Digic V. They've unveiled new Digic processors in lower end cameras before (even P&S, I think). T4i might have the same sensor, but be the first entry-level camera to do 10+ fps, better noise handling, better DR, etc...
For those who think this is "crazy" or would cannibalize their line, I say you guys are nuts. Nobody who needs a pro body is going to drop their FF body or 7D to switch to a Rebel. Some would probably upgrade their backup camera, which would suit Canon fine. But Nikon would feel a blow. The competition (and Canon knows this) is between their low end and Nikon's low end. Their mid-end and Nikon's mid-end. Their high-end, etc...
I think the reason they "downgraded" the xxD line was to put more space between it and the xD line. It's all due to similar reasons that they're gonna get combine the 1D bodies: advances are coming so fast that it's hard to differentiate, and prices are dropping on great gear so much, there's no room in the middle!
With a new 5D body in the $2,500 range, there's not much space for THREE tiers of models below (four, if you count the XSi or entry-entry Rebels). I'd be happy to see the xxD line disappear. The Rebels are incredible cameras for the price. Let them sit in the $900 range and pack in the features (like Digic V and higher FPS). Let the 7D sit in the $1,500-$1,700 range. Then the 5D, and then the 1D.
I don't think the order they upgrade these in is all that important. Nobody is screaming about how far superior the rear LCD is on the Rebels compared to the 1D when that upgrade happened. And who would have thought a Rebel would have remote flash control built-in? Doesn't that sound like something that would "cannibalize?"