At only 2.75 x 2.06 x inches and 1.74 ounces, the iPod in nano is pretty small and light; especially for a media player with 8 gigs of storage. Wouldn't it be cool if Apple released an iPhone version of the nano? Well, if a recent report by the Daily Mail is correct, Cupertino may just do that in time for Christmas.

According to the article, the device - called the iPhone nano - could sell for as little as £150 (about $295 by today's exchange rates) in the United Kingdom for pay-as-you-go customers through O2.

Yes, that’s more than today’s iPhone in U.S. dollars, but that price would supposedly be unsubsidized. That means, a carrier like AT&T, which subsidizes the iPhone 3G by $300 to bring the cost of purchasing down to $199, could offer an iPhone nano for even less, perhaps even for nothing with a contract.

Rumor has this edition of the iPhone could have a display on the front with a traditional iPod touch wheel on the back for navigation.