9 to 5 Mac is reporting that employees inside Apple are testing the internal hardware of the iPhone inside of iPhone 4S cases. Presumably this is to deter leaks. That seems to be the right move since we all know how hard it is for Apple employees to hold onto their prototype phones after having a few drinks.
The post over at 9 to 5 Mac claims these new iPhone prototypes have a version of the A5X chip found in the new iPad. It isn't the same exact processor found in the new iPad, but a variation. The prototypes do, however, sport 1GB of RAM. That's a lot of power for an iPhone, and puts it in range of some of the higher-end Android phones that are being released. 9 to 5 Mac stresses that this is only an internal build and not what the final new iPhone will definitely have inside of it.
In addition to this new iPhone news, 9 to 5 Mac also got hold of an internal iOS 5.1 build. Inside of it they found reference to "iPod5,1" which appears to refer a new iPod. They speculate that a new iPod could also have an A5X chip inside, but I think that's speculation best left to the future. Preferably when we have more to go on about the new iPod beyond a reference in an internal OS build.