My guess is something basically along the lines of the Wii U controller, but far thinner/more portable. Something overall that's probably around the same overall size of an iPad mini, but a bit thicker to make it more comfortable to hold for gaming. 

6-7 inch multitouch "gaming tablet" 1280x720 resolution display, same button layout as Wii U, 2x the Vita in horsepower, 2GB RAM (1GB for OS), stylus support, maybe compatibility with certain Android apps but only accessible through Nintendo's store (similar to what Amazon does with the Kindle). $199-$250 launch price, no more than that. 

Can run HD versions of 3DS games with ease, and even some Wii U engines allowing for a lot of cross porting.

Will be huge in Japan, in US/Euro will be more of a kids/entry level tablet relative to what Apple is doing. Will enable Nintendo to double/triple+ sales of certain Wii U projects by allowing for ports. 

This is essentially how the Vita works.  It's why Sony had created quite a few cross-buy titles.  The PS3 and Vita are essentially one development unit now.  Which hasn't worked out too well for Sony, which makes me sad. 

@ Soundwave, is that really the case though?  Those games aren't helping the Wii U one bit now are they?  Heck, from the look of things Nintendo is trying to do this hybrid already with Sonic and Smash Bros.

This is nothing new. Nintendo themselves had already said they always start development on the next system shortly after the launch of the new one.

Shocking that this time its news eh?!

People still like Nintendo software, however I think the days of people buying an entirely seperate home console to get 3-4 Nintendo franchises per year is kind of fading. It's a tired proposition that Nintendo's been trying to push since the N64 days and without a controller gimmick to drive sales this time around, Nintendo is simply returning to their console decline. 

But obvious Nintendo still has a lot of pull, if they didn't the 3DS would be selling like the Vita. Nintendo does well in the portable space, a tablet from them would sell far better than the Wii U, IMO in Japan it could probably outsell the 3DS itself.

umm I think all three are already doing it in one way or another

True, but if it's legit that they've already chosen a SoC design/vendor, that means quite frankly that software may already be in development and that they're well past the 'lets dick around with some hardware concepts' phase. That would be significant. 

I think it definitely puts a 2015 launch into play for sure. 

true, but I thought i remebered them spending a ton of money during the Wii years on R & D.  They could be further along than most expect.  Also, remember making a thread not too long ago about how we could see a late 2015 reveal or e3 and probably hear a lot of noise in late 2014.  But perhaps the rumor mill will start even earlier.

When did the 3DS come out again?

Early 2012, but really it was supposed to launch for holiday 2011. 

Every company begins work on their next console once their current one is out in the wild. This is not news, and should not surprise anyone.

There is absolutely zero reason to believe that Nintendo is even considering launching another console outside of their usual timespan of 5-6 years.  Right now it's about brainstorming harware ideas and beginning R&D for next-gen.