Your central question is an absolutely legitimate one. There is no inherent technological reason that a digital body cannot be engineered to the specifications you mention. It is certainly possible. The previous limitation of processor speed/buffer size/data bandwidth at reasonable cost is no longer the brick wall it used to be. So we may well see the transition to 35mm sensors with fast frame rates.


As I imagine it from the manufacturer's perspective, the issue here is twofold: there is the answer to the question "what feasible technological improvements are desired in a body?" and then there is the question "in what way(s) can we differentiate our product lines and at what combination of features and price points?" Since I am not the manufacturer, I cannot speculate as to how Canon would answer these questions. But it certainly seems reasonable to me that the next logical evolution of the fast FPS body is to go to full 35mm. The pixel density will probably be lower than a 35mm sensor for "studio" work (i.e. anything except for fast action).


There is a bit of a twist to this story, which is the situation faced by present 1DmkIII owners with respect to issues with the accuracy of AF Servo mode. Perhaps there is a problem with Canon's QC and/or AF firmware. There have been reports of improvement after the latest firmware revision but this issue may be indicative of a more serious underlying problem. AF Servo and FPS are intimately related, as the former is very often used in conjunction with continuous shooting mode.


So then perhaps the real question is this: is Canon capable of making a camera with superior AF Servo performance at > 10fps, and with, say, 45-zone AF? We know Nikon can do it. But I believe that we have yet to really see Canon deliver in the 1DmkIII, despite reports of the issue of AF accuracy being fixed.


You can see then, that it is not simply enough to ask "what is possible?" Canon also has to consider how such a product fits within their existing lineup, whether it would serve as a replacement for the 1DIII, or whether a lower-density sensor actually belongs *above* the 1DsIII, or...who knows? And how much would it sell for? As such, speculation about what will come next is really quite futile because photographers are, to a fault, obsessively preoccupied with "what can we get," not "what business considerations are attached to the development of camera technology." After all, why should we care about the business end? That's for the manufacturers to wrestle with. But my point is that it nevertheless influences and informs the design decisions, and to that end, we ought to care if the goal is to try to predict what will come down the pipeline. Not doing so is willfully disregarding critical facts and drawing hypotheses on partial data.


We see this sort of thing with lenses as well. People have been talking at length about a hypothetical 24-70/2.8L IS, a successor to the 24-70/2.8L. And as popular as such a lens might be (based on how many people I've heard wish for IS), I just don't think it's going to happen any time soon. Why? Because at about 2 pounds the 24-70/2.8L is already huge and heavy. Adding an IS group would probably put on another half pound of weight, make it longer, more expensive, and worst of all, compromise on quality. It is NOT a trivial task to design a f/2.8 zoom at any focal length. Are people really thinking that a 24-70/2.8L IS could be a suitable walk-around lens to replace the 24-105/4L IS? Sure, I suppose there are many photographers out there who would be willing to lug a heavy chunk of glass around town. But you also have the fact that as the focal length gets shorter, the benefit of IS also diminishes. Furthermore, in this down economy, Canon probably isn't going to spend a lot of time/resources to redesign lenses that are already excellent. In summary, when you hear these kinds of rumors, it's really more confabulation than fact.


To address your statement about the sensor format and comparisons to
film, the reason why film bodies were all in 35mm format was because
the medium itself was a single fixed size. And to support multiple
slight variations in size would have been madness as doing so would
cost more than any price differential due to the per-unit cost of
film. A single standardized film format was what was economically efficient.
This is not the case in digital, where the very inherent nature of the
imaging medium is such that the per-unit cost of manufacture is tied to
the defect rate which in turn is directly proportional to the area of
the sensor. Unless manufacturing processes fundamentally change in
such a way that makes these defects scale more reasonably to sensor
area than at present, we will not see significant cost structure
differences. An APS-C sensor is about 38% the area of a 35mm sensor.
That translates into considerable cost savings, as a single silicon
wafer can be cut into nearly 3x as many sensors, and a larger
percentage of these sensors will be defect-free. Eventually, perhaps the cost curve will flatten out to the point that maintaining different processes will not be justified. But I believe that is unlikely to happen before the next revolutionary change in imaging technology takes place. In short, the sensor area is most certainly the dominant factor in determining the ultimate cost of manufacture in a camera, as it affects the design of the two most expensive components of the body: the sensor itself, and the processor(s) that must accept and interpret its data. A 16MP sensor recording images at 10fps is going to have to push over 190MB of RAW data every second to a card. That is not trivial processing power and it does not come cheap.


And so we come full circle. What will Canon give us next? I really don't know. I don't really think it's all that important, to be honest. To me, I'd much rather think about things that I can control that have a direct relationship to what I am doing, which is taking photos. I use a 5DmkII and my latest toy I'm having fun with is the 70-200/2.8L IS. It's a nice piece of glass. If I worried about the rumors that Canon was going to redesign it, I'd never have the photos that I took since I got it. And that's what matters most to me. Photography is only peripherally about the tools--the real purpose is to capture your vision, your interpretation of what you see in those fleeting moments happening around you all the time, moments that will never come again.