So, here's the story so far. Engadget received the photos (and for once, not made with a BlurryCam™) from someone who claims to have found the device on a floor of a San Jose bar, stuck inside a case for an iPhone 3G. It apparently ran a "decidedly new" operating system, but now, it no longer boots. It has 80GB of storage, a front-facing camera, a camera flash, a higher resolution display, and uses MicroSIM instead of regular SIM.
If all this sounds shady to you, then you're not the only one. However, Engadget delved into its own image archives, and found another photo of this device right there next to a test unit of the iPad. Engadget also cites another source claiming this is the real thing, and John Gruber, too, claims this is the real thing after having phoned around. However, Gruber does add that while the internals of the device are indeed iPhone 4G materials, the external is just a test case, and not the final shipping design. He claims that the glass back will make it into the final design, but the sides of the device he's not sure about - it does contain un-Apple like seams.
"So I called around, and I now believe this is an actual unit from Apple - a unit Apple is very interested in getting back," Gruber writes, "I am not certain that this looks like the actual production unit Apple intends to ship to consumers. I think it's a testbed frame - thicker, with visible (un-Apple-like) seams, meant to fit in 3GS cases so as to disguise units out in the wild. It's hard to tell from the photos."
Overall, I have to say the design looks pretty minxy, but I'm not sure about the durability of having not one, but two glass panels on your iPhone. Drop this thing, and you'll potentially crack both sides of your phone - not a pretty sight. Then again, it might be that Apple has developed some new super-sturdy material.