Can the PS4 even get any smaller? i mean its already Japanese

There is one currently in development/testing, though not at an aesthetic stage, just a compressive architectural approach at this point in time, mainboard and cooling solutions roughly 35-40% smaller than current.
from the pcb revisions i have seen, one will feature onboard flash in place of a hard drive (but have a slot for one), and the other has no flash so i assume is a hard drive provided sku.

From that i would guess a slim 1tb and a slim 32gb flash for $50-75 less.

These new chips will also mean a price reduction for the older type at first. So Sony will probably be getting cost savings for the 1/2GB GDDR5 chips. Then as previously stated there will be a major revision of the internal pcb that makes use of cheaper but compatible components including denser GDDR memory.

I'm not sure Sony will be that keen to move away from the 28nm fabrication process for its APU though until a major revision like a slim model because that will require a huge costly re-design.

I'm not keen on the ps4 styling I have to say. I really liked the initial ps4 design. It would be great if the slim looked more like that. For me at least.

September 2016 at earliest, because the new tech won't bring real savings in its first year, or in the best case, not enough to justify an early redesign. Until the new chip cost drops enough, economies of scale and production process refinement of the original model will bring more savings.
Also, the Slim model usually provides a big sales boost, it's better to already have a large enough existing game library and additional big games launches for the new HW launch period to maximise its effects. Moreover a big sales boost requires careful planning of production and logistics, to avoid wasting its full sales potential or damaging profit margin.

Is it as simple as swapping in higher density chips? Won't memory bandwidth drop by half if they just did that?

I think they will need to have a wider memory bus, maybe higher clocked ram chips aswell, to get it up to the 176GB/s theoretical max. It could also require a redisigned memory controller, which means a new APU.

I could see them keeping a 500GB hard drive as long as its meaningfully cheaper than a 1TB one. Maybe 2 skus with both options.

Don't worry, Sony weirdos engineers will design a mugh sexxxier new console. Pencil shaped.

I don't agree with that. 32GB flash? You can't play half of AAA games there. 32GB of fast NAND will not be significantly cheaper than sticking with a 500GB hdd aswell, when you factor in the engineering work to change the consoles memory system.

Memory bandwidth is controlled by the size of the bus and the clock rate. The bus size isn't changing and the flock rate doesn't have to either so bandwidth isn't going to be affected.

All this means is that instead of having 16 x 512Mb chips in a clamshell config (8 on each side of the board) they could have 8x1GB (4 on each side of the board) which would reduce space taken up by memory on the board by 4 times. 

Anyways, I don't see a slim PS4 being released till 2017. Especially when considering that a slim XB1 will basically bring it down to PS4 size. But when we do have a slim PS4 I expect we will get PS2 level of slimness. 

Agree: I could see a prototype with just 32GB, but they could be willing to wait for 128GB flash to be cheap enough for the entry level model, so probably not before the last quarters of 2016. By then the upper model will be equipped with at least a 2TB HDD.

PS4 Slim will be Sony's answer to MS price cuttings. I'll expect it in a year or two.