It's clear to me that iPhone is a compromise device, while iPod Touch isn't. iPhone is essentially iPod Touch plus a bolted-on radio that makes it backward-compatible with existing GSM wireless voice networks. It's like a Mac with one of those MacCharlie things that essentially included an IBM PC.
Two months ago I wondered aloud, Will iPod Touch Get GPS? Now I wonder why everyone is so fascinated by the prospect of 3G (yep, it's faster) and so indifferent to the iPhone's potentially much more disruptive sibling, iPod Touch.
iPod Touch is a pure device—data-only. It's $100 cheaper up front for the customer, and more importantly, doesn't require any expensive, long-term commitment to a wireless carrier—by customers or by Apple. (However, if Apple managed to slip 3G data support into the Touch I'd be thrilled.)
So will iPod Touch get GPS? I'd bet so. Location-based services are set to explode, and Apple is forecast to sell 10x as many iPod Touches as iPhones next year. What else will find its way into the unheralded flagship product of the Touch platform? I can't wait to find out.
Update: As it's been pointed out in the comments, an ala carte wireless data plan would mean that maps for the GPS functionality wouldn't have to be stored on the device. But remember, mapping is only one of many possible location-based services.
Update: Wow, talk about wrong. No updates to the Touch today, and with the iPhone's price drop, the cheapest (8GB) Touch costs the same as the most expensive (16GB) iPhone 3g (ignoring for a moment the $1,440+ you'll pay to AT&T over the course of your mandatory wireless plan). Of course Apple could introduce new iPod Touch models after today (like they might do with the rumored new MacBook Pro models) but it looks like for now Apple has decided to double down on iPhone and leave iPod Touch out in the cold.

...i presume you would need to carry a separate phone...I guess you could hack and do VoIP calls on the Touch when you can access Wi-FI, but in the car?
Also iPod with GPS would need lot more storage for maps?
Posted by: vinnie mirchandani | June 07, 2008 at 08:01 PM
With the SDK expressly forbidding apps use of the dock connector, current iPod Touch hardware will never do voice calls.
Until the "multi-year" contract with at&t expires, I expect the Touch will be microphone-free.
(Upside: The length of the exclusive contract has never been officially confirmed. "Five Years" is a rumor that came from The Wall Street Journal, got repeated in the New York Times - and has been taken for gospel ever since. If "multi-year" turns out to be two years, the headlines will read "Apple brakes contract with at&t!" and the journalists will proclaim it
"proof" that Apple always screws it's partners. )
Posted by: Gerald | June 08, 2008 at 09:04 AM
Gerald-that's an interesting tidbit about the length of the AT&T contract.
Vinnie-map data isn't that all that big. If I can get maps (including POI's) for all of North America for my car on a single DVD, that's 8.5GB max. 8GB of dedicated flash memory would cost Apple ~$25, but they could probably get that price lower by upping the total storage to 48-64GB and partitioning off some of it for maps.
Ideally we'd see an iPod touch (the "t" is apparently no longer capitalized by Apple-weird) with a cheap data-only (EDGE or 3G) wireless plan that requires less hacking than the one Erica Sadun discovered (http://tinyurl.com/4xhads).
-c
Posted by: Charlie Wood | June 08, 2008 at 09:54 AM
I would love to see the iPod Touch come with 3g network accessability and a microphone for skype usage.
Posted by: Ipod Republic | June 08, 2008 at 03:30 PM
Awesome! I love my iPod touch.
Posted by: Partners in Grime | June 08, 2008 at 09:46 PM
Charlie, the Erica link above is broken...do you have another one?
It would have to be 3G. VoIP over Edge is close to useless, and even 3G is inconsistent around country and I have tried Sykpe in multiple locations with weird results like hearing the called party, but they cannot hear etc.
Also, I suspect AT&T would fight that tooth and nail...that would give VoIP over mobile a huge boost not sure they want - yet.
Posted by: vinnie mirchandani | June 09, 2008 at 08:51 AM
Vinnie-
Oops, the link is: http://tinyurl.com/4xhads
EDGE would be fine for most data applications (not voice), which I think might wind up being OK. But obviously 3G would be better. :-)
-c
Posted by: Charlie Wood | June 09, 2008 at 01:03 PM