Will image effects be enabled in the much discussed 1.1 update to Unity iPhone?
Or is their absence in 1.0 due to some insurmountable limitation in the graphics hardware on the iDevices?
Which image effects you have in mind? Most of interesting ones do require pixel shaders (so iPhone is out) or at least 4 texture units (so iPhone is again out). What’s left is probably “invert colors!” and maybe blur/glow in several passes.
Wow! I’m just glad to hear it might be possible!
Color changes would be nice, of course.
But blur and/or glow would make me the happy enough to shout with girlish glee!!!
Can we have it by 1.1? 
I don’t know how you could do blur or glow in post without pixel shaders.
Image blurring doesn’t use pixel shaders. It’s a matter of downsampling the image many times and adding each downsample together which is all doable with texture combines.
But you would have to render to texture to be able to use the framebuffer output as a texture to be used with texture combiners.
Well FBO are supported in OpenGL ES
What you can’t use is a Pixel Shader that manipulates each texel.
But as Shawn said, it’s possible to render the scene onto a texture and downsample it a few times and then combine the textures.
It’d be slow as hell though.