YAY hitachi released 8GB, and 10GB microdives that are only 1 inch. These are the same drives the iPod mini uses, yet twice the size.
I'm not sure if they'll use the same interface as IBM's microdrives or what. If there was a major interface change, something probably would've been said.
I haven't seen them from my supplier yet but if they're the same as the 4GB ones it should be USB 2.0.
You can get a 5GB seagate microdrive on ebay for arount $200. Great for Pocket PCs with CF slot. I had a 4GB hitachi. It worked good, but it sucked the battery fast.