Look what someone just dug up in the latest OS 3.0 beta!
Yes, that's a still/video toggle switch, and what can only be a ginormous Record button. So it looks like OS 3.0 will support video recording at the very least. (And based on previous unearthings, some kind of video editing as well…)
Currently, none of this functionality is active; all the hints of video-readiness came from tweaking configuration files into fooling the OS that a video camera was present.
(Maybe next week, some enterprising hardware hacker will jury-rig a webcam to their iPhone and REALLY get this party started…)