Logically speaking, it shouldn't be a huge surprise. But a friend in the industry told us that they've seen H.264 1080P video playing on the iPhone, quite a few times, with no problems at all. Of course, the resolution is absurd overkill for the system's screen, but what's this mean in light of the purported iTunes 8 HD? Potentially a lot.For one, if iTunes 8 indeed goes HD, the iPhone is more than ready to run its content natively—especially considering that iTunes HD clips would probably be the same as Apple TV's (which is just 720P). That means no needing to convert HD clips for the iPhone/iPod touch (or maybe even the next generation of iPod?), which would seem more like Apple's style. And while running videos at a higher resolution than needed isn't ideal for processing or syncing times, who knows, with the right adapters, maybe the iPhone could even put this video on your HDTV. It's tough to tell exactly how Apple would handle iTunes in HD since clips would still presumably have to work on hardware like the iPod Classic and iPod nano—both of which lack the umpf of the iPhone's 620Mhz processor (though, yes, h.264 decoders in all current iPods/the iPhone handle decoding). But if the iPhone handles HD clips, that certainly buys Apple some flexibility.
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HD on a 3 inch screen is the most absurd thing I've ever heard. What a waste of memory and processing power. You'll have to stop and recharge the battery twice to get through a whole movie.