It looks like the iPhone will record video this summer. Buried in the latest iPhone 3.0 beta is this screenshot of what's obviously the iPhone's still dormant video recording interface. UPDATED
Besides the honking red record button in the center, there's a toggle to switch between the still camera and video recording. Inside the configuration files where the screen was discovered were mentions of an "auto-focus camera," "magnetometer" (digital compass), and "Voice Control."
One question though—in order to get the screenshot to appear, the configuration files had to be modified to tell the firmware that a video camera was present. Given the other capabilities mentioned, like the auto-focus camera, it seems like this means Apple could restrict video recording to the next iPhone only, even though the video recording possible with jailbreak apps now shows the current hardware is capable of doing it.
Still, pretty exciting, especially since we just got video MMS to work on our iPhone, thanks to Scratic:
Updated: BGR snagged some additional screenshots of the iPhone 3.0 interface, which include more screens of the video recording.