iLounge is reporting that Microsoft will be releasing a new Zune on Monday:

We’re hearing that Microsoft’s holding an event in Redmond on Monday to preview/announce a new Zune Рmost likely the flash-based one the company’s been hinting at for a while. No other details yet; if there’s something worth telling you about on Monday, we’ll let you know.

There’s speculation about whether it will be a flash-based Zune or a Zune phone.

Odds are against a Zune phone. Microsoft CEO Steve Ballmer, right, recently pooh-pooohed the idea of a Zune phone, saying “It‚Äôs not a concept you‚Äôll ever get from us.”

The biggest question is not whether Microsoft will introduce an flash Zune or whether Steve Ballmer will talk about squirting, but whether they will be able to do anything to recover from the Zune’s botched introduction and change the perception of the device as just another iPod-killer wannabe.