They should refresh the naming cycle next year and use iPhone (The 4.7"), iPhone Plus (5.5") and iPhone Petite (4"). Each of them have the same CPU/GPU, RAM and CAMERA, but differ in weight and battery sizes.
Upgrade wise I'd like to see them slim the top and bottom bezels of the device which shouldn't be that difficult to attain. Perhaps increase the thickness of the device and get rid of that camera bump which (I Imagine) should also help with any "Bending" issues.
More RAM and better internals are a given, but I think the current iPhone's are pretty well equipped and I'd rather see them focus on improving usability through design rather than focus on hardware improvements.
Price and product line-up wise I think both the iPhone and iPhone Petite would be $199 and the iPhone Plus would continue to be $299. I'd drop all the older devices minus the iPhone 5S and sell that for free with a two-year contract.