Even though i do believe that iTunes is long overdue an overhaul, the legacy of the app across the many iOS devices it controls and manages would be a nightmare to control. Many people don’t like updating, they’re perfectly happy to stay on iTunes 9 if they can still manage their iOS device.
But even splitting the app up into different uses would cause confusion.
Would you really want to have 3 different apps open just so you can arrange your photos, music and contacts? Of course not.
The extreme case scenario would to use iCloud to manage everything except your ripped music and videos. have iTunes to stay true to it’s name, and only manage that in iTunes 11.
The rumour is that the store will be given a total redesign (it’s third iteration) in the fall.
Perhaps by the end of the year we will know the answer.