It looks like The Penguin will be in Batman: Arkham City. One of the trailers showed Oswald Cobblepot's Iceberg Lounge, but it could have just been a reference just as he was referenced in Batman: Arkham Asylum.
However, developer Rocksteady's Dax Ginn revealed to the Australian Sunday Herald that The Penguin will indeed be in the game, and Arkham.Co.Uk grabbed a scan of the character.
According to Ginn, "The way that Penguin has always been portrayed is as quite an aristocratic, well-spoken gentleman who's got these twisted delusions of grandeur. So we've made him a really horrible, nasty piece of work - but still with the delusion of grandeur. He dresses well, but in a poor taste, and we've made him this brutish, brutal guy but also key into collection fascination that hes had through out the years."
The first thing Penguin does is sic his goons on the Bat to try to kill him. Ginn says, "Penguin's faction is much more about the collection that he has within his museum of all sorts of things but one of those things he collects is heavily artillery. So, when you come up against his thugs in the street they are all going to have seriously heavy weapons and that develops throughout the game as well."
Ginn also revealed some new things about Catwoman. "The attitude of this Selena Kyle is closer to that of the late, great Eartha Kitt from the cult 60's tv show: strong, confident, sexy and independent." Ginn added, "Comic book nerds will notice Arkham City's Catwoman appears to have been designed in the style of Adam Hughes's covers from the third Catwoman series, a feature Rocksteady hoped people would spot."