I think Apple would be making a huge mistake to play it safe right now when there are some absolute monster phones in the pipeline from the competition. The iPhone 5 not only has to compete with what's out already, but for the next year, an iPhone "4s" would look pretty silly compared to some of the stuff I've read about.
I love the Apple ecosystem, but a retina 4-4.5 inch screen phone with 2-4 cores, and other crazy specs just might be enough for me to jump ship, I could keep my iP4 and use it like a Touch so I have all my apps etc..
You also have to take into account that if people sign new contracts next month they might not be eligible for an upgrade until early 2013, meaning a lot of people would be stuck with this 4s until the iPhone 7 came out. So there's no way I'm wasting my upgrade for a speed bump which really would only benefit me when waiting for pics to render with apps like Hipstamatic, I need a good reason to upgrade. And if companies like Samsung or HTC can come out with a zillion phones a year of all shapes, sizes, and resolutions, Apple can surely give us one. If they can't, well hello Nexus Prime.