Very helpful, thank you. Looks like my wife is getting a Nano instead then
I wouldn't be so quick to dismiss the iPod Touch camera. Sure it is lo-res. But depending upon what you want to do with the photos, it just might be good enough.
I took my 4G iPod Touch 64GB with me on a trip to Romania as my only mobile device. I took 100's of photos with the Touch that (because of the almost instant on capabilities) I wouldn't have otherwise been able to take. They look fine when displayed on social media sites. But obviously would not look good printed.
I purchased the "ClearCam" app for it. ClearCam takes a rapid succession of images and uses that data to construct a higher res image. On those occasions on the trip where I wanted a higher res image (group photos), the results were quite adequate. I also took 3D photos with it (using the 3D Camera app and viewing them on the iPod with Hasbro's My3D viewer) which were terrific.
Given the slimness and functionality of the iPod Touch, I was delighted with the results overall.
Having said that, I just recently purchased a 32GB iPhone 4 (with a bad ESN due to non-payment of cell contract) for use as an "iPod Touch Pro" ($210-in pristine condition). As others have said, the iPhone 4 camera is excellent.