My guess is that they want to make the lower-cost iphone feel "less premium" than the iphone5s, to avoid cannibalising its sales. Thicker could be because of different brand of parts which are not as small? For example, there are rumours that Apple might not use their A-series of processors, but instead utilise snapdragon processors.
I am more interested to know how they intend to "gimp" it. My guess is that it will obviously omit Siri, but buying into the IOS ecosystem would mean consumers still enjoy maps, mail, facetime, imessage and icloud. Will it still be retina?
It's unlikely that they would not use one of their existing A-series CPUs, and more likely it will be functionally capable somewhere within the range of the 4S/5 level. Whatever capabilities it misses will also likely just be new ones that are only on a "5S". If they retain the 5 as the $99 option, and replace the 4S as the "free" offering with the so-called iPhone Light then that makes a lot more sense with Apple's history.
There's no way Siri functionality won't be included and very unlikely it won't be Retina. It makes no sense from a supply chain sourcing strategy to move to a different screen.