Overall, I thought this was an amazing upgrade to the iPod Touch. Perhaps this is due to the fact that there wasn't an upgrade last year.
Other than GPS/Cellular capabilities, the only differences I could find when comparing the iPod Touch and iPhone tech specification pages side by side was that the iPod has the A5 instead of A6 processor and a 5mp versus 8mp camera.
And yes, it's very expensive. But if you consider that it's completely non-subsidized, unlike the carriers who heavily subsidize the iPhone, maybe $299 isn't so bad. I would like to know the component costs involved.