A report in the Sunday Times suggests that the Scott Trust, ultimate owners of the Guardian and Observer newspapers among other assets, has been shown a dummy of the Observer in magazine form. Publication day for the proposed news magazine would be Thursday.
The immediate conclusion to jump to is that the new title might be a UK version of Time or Newsweek, but it is worth remembering that the Spectator has been doing well recently while the New Statesman seems unable to manoeuvre its way out of an unstoppable tailspin. This might leave room for a current affairs magazine of the left, which would fit with the Guardian/Observer political axis.
Alternatively, The Week provides a model that could make good use of the Guardian group's news resources – if they could hire people with the necessary rewrite skills.