Hi Hon - I grew up in Teesside; nice to hear of another northeasterner.
My 2¢ worth:
Hub gears may seem heavier but they are so much less hassle - especially on a folding bike.
I think the area that needs most work in folding bikes is the handlebars and stem - getting a good position is hard and sometimes the stem is really flexible. I'd look at recent ideas at handlebars used by brompton.

Dahon are using a new dynamo hub this year that allows things like mobile phones/iPods/GPS systems to be recharged when riding. I think this would be a nice feature on a design project like yours if only for the "wow" factor (I've been throught the design college mill myself so I have a clue as to what they'll be looking for). Check out their 2006 catalogue - I think it's in the 'accessories' section at the back.

Consider the idea of fixed gear also - it's still a niche but growing in popularity amongst commuters, and though not for everyone - you can't really get a lighter or more maintenence free drivetrain. Fixed or freewheel - either makes for a simple bike, though not for hillier climes.

I'd also look at Pantour suspension hubs as a good front component - again - a lot lighter than a full suspension fork setup and weight is THE issue with a bike you carry as well as ride.

Also - the ability to 'wheel' the bike like wheeled luggage is a good feature - bromptons are great for this (though a handle of some sort so it can be towed like a case would be cool.)

Finally - Regulars here will be going 'oh no not again' about this one because I'm always mentioning them - but there's this really cool bike made in Japan by Kuwahara called the Gaap (sadly not available in Europe or the US) that has a pretty original take on folding and a smart rollerblade-wheeled rolling mode.

here:
http://www.rintendo.com/Products/Sma...ap-folding.htm
(be sure to look at all the Gaap links on the left nav)

Hope that's some help; You have to promise to share your final designs with us when you finish the project!

Best
Huw