Here's the scoop from a reliable source:
"Shaun Toub is playing Dr. Yinsen, another prisoner of the terrorists. I will also say that Tony will be wearing the suit for more than protection from the outside but also to help with a new internal problem. That first suit does not have the famous repulsor beams but has rather more of conventional weapons, two hot ones. It does however the power to fly!"
IMDB.com does not yet show a character listed for Toub.
He also states that Terrence Howard will be playing an Air Force Lt. Colonel in the movie.
It makes sense to me that they would cast Yinsen as being of Middle Eastern descent, and although the statement above does not confirm the chestplate of the suit was created to keep a piece of shrapnel from moving towards Tony's heart it does reference a medical reason for the armor.
No repulsors, but flamethrowers instead (which was pretty obvious from the image released by the studio). What surprises me is that the Mark I armor will have flight capability... I really didn't expect that, and thought they would add it with a later incarnation of the armor.
Thanks to "S.Rogers" for the update.