More interestingly though, Rose says that Apple will uncrate iTunes 8, the first major overhaul of the software since iTunes 7 launched two years ago. Rose claims that iTunes 8 will boast some significant enhancements, among them HD-quality TV show downloads, a new “grid view” browsing feature and a playlist recommendation engine called Genius. “iTunes 8 includes Genius, which makes playlists from songs in your library that go great together,” Rose writes. “Genius also includes Genius sidebar, which recommends music from the iTunes Store that you don’t already have.”

Notably absent from Rose’s list of new features: iTunes Unlimited–the $129-a-year all-you-can-eat subscription service that Apple has been rumored to be considering for some time now.

Like all such reports, Rose’s should be taken with a grain of salt, if not an entire salt lick. Rose was, after all, the guy who erroneously claimed Apple’s first iPhone would feature a slide-out keyboard, dual batteries and CDMA, and GSM support.

Developer keys for Facebook Connect are available today. Apps should be rolling out soon.

Last Friday, Digg founder Kevin Rose, whose “Diggnation” videocast has become a sort of Psychic Friends Network for Apple rumors, claimed the next-generation iPhone would include two cameras and support for video chat. A few days later he added that the device will also run on a faster 3G network, include GPS and ship in June.

Now Gartner Group analyst Ken Delaney has joined in the handicapping, speculating that the device will boast an organic light-emitting diode display that will make it thinner and reduce power consumption. Delaney says the iPhone’s somewhat disappointing performance in Europe has forced Apple’s hand, inspiring it to fast-track the 3G phone and place an order for 10 million of the devices from its manufacturing partners in Asia.

Could it be that Apple is planning to announce the 3G iPhone at WWDC, with an eye toward an official release on June 29, the first anniversary of its predecessor’s debut?

If Digg founder Kevin Rose is right, Apple’s next generation iPhone will include not one, but two cameras–the second a front-mounted video camera designed for iChat AV.

During a recent episode of his weekly Diggnation vidcast (see above), Rose claimed that the new iPhone reportedly being prepped by Apple (AAPL) for a summer release will enable video conferencing over AT&T’s (T) high-speed 3G wireless network.

Like most such predictions, Rose’s should be taken with a grain or two of salt. His last iPhone premonition, which had the device featuring slide-out keyboards, dual batteries and CDMA and GSM support, was laughably inaccurate. That said, he did accurately predict the debut of iPod nano ahead of its 2005 debut. So there may be something to his latest claim. Certainly, it sounds plausible.

Anyway … Digg has reportedly hired New York investment bank Allen & Co. to help it find a buyer and has tempered its hopes for a $300-million sale price to a more realistic $200 million to $225 million. Microsoft, it’s worth noting, is said to be mulling a price even lower than that, which makes perfect sense since the software behemonth is already the exclusive provider of display and contextual advertising on the site. Course, Microsoft had a similar deal with Facebook, and that didn’t stop the company from taking a $240 million stake in it that valued Mark Zuckerberg’s little Harvard project at $15 billion.

UPDATE: According to Digg, this rumor is–like others that have gone before it–utter nonsense. In a post on the Digg blog, CEO Jay Adelson writes, “Normally our policy is to not comment about things like this, but this morning’s rumors about a bidding war involving Google and Microsoft have created such a stir we feel compelled to tell you all directly that they are completely inaccurate. Sorry to burst any drama theories, but they aren’t true. We remain focused on improving Digg and rolling out great features.”

What is surprising is that the result of those cracks, the AACS key, would inspire a digital revolt on a popular social news site after being widely available online for so long. Yet, that’s what happened Tuesday when administrators of Digg.com began deleting story submissions that pointed to the AACS key (the publishing of which could be a crime under the Digital Millennium Copyright Act). In a matter of hours, Digg’s users rebelled, flooding the site with posts referencing the key. Turned out Digg Inc. doesn’t entirely control Digg.com. Crowdsourcing does have its disadvantages. Just look at the Digg mob running the asylum.

Finally, Digg’s leadership conceded. In a post published on the site’s blog, Digg founder Kevin Rose said the site would no longer censor stories containing the AACS key. “We had to make a call, and in our desire to avoid a scenario where Digg would be interrupted or shut down, we decided to comply and remove the stories with the code,” he wrote. “But now, after seeing hundreds of stories and reading thousands of comments, you’ve made it clear. You’d rather see Digg go down fighting than bow down to a bigger company. We hear you, and effective immediately we won’t delete stories or comments containing the code and will deal with whatever the consequences might be. If we lose, then what the hell, at least we died trying.”

(BusinessWeek cover courtesy ILoveKetchup)