It should still use "standard" memory cards - I think compact flash would be good, as this could also allow support for microdrives (which I believe still have higher capacity than flash cards.) Although SD would also be good.
Backwards compatibility would be a must. Also, as others have said, more buttons would be appreciated - there should be at least 2 extra front buttons to make controls for SNES games better. If we're going for N64 emulation, there should of course be an analogue stick as well as the D-pad. In fact, why not go the whole hog and have full-speed PS1 emulation? This would need an extra couple of triggers, but would probably be feasible as a full ISO could fit onto a memory card. And, of course, the usual improved processor/memory/graphics capability....