Footage of the arcade version of Street Fighter 4 has confirmed that both Sagat and Balrog will feature in the game. The news comes by way of Capcom's blog which shows both characters in action, although "not in their final form".
Both characters are not currently playable, but can be fought against in the single-player mode, if you happen to get a game when there isn't another player challenging you.
The blog also notes that three new stages are featured in the latest build: North America: Drive-In at Night, South Asia: Beautiful Bay and South America: Inland Jungle.
Street Fighter 4 is currently in development for the arcade along with versions for next-gen platforms.