Some sites still insist that there will be an iPhone Nano at Macworld Expo. I guarantee that there will NOT be an iPhone nano.
Just think about it. Look at your iPhone and bring up the keyboard. Do you really want a smaller screen? Will most people with average sized hands be able to comfortably use a smaller keyboard than the current iPhone keyboard?
The limited screen space would force developers to redesign their applications to fit on a smaller screen and make it necessary to maintain separate versions for regular iPhone or iPod Touch and iPhone Nano.