Agree. I don't think they'll ever do it but I think they should, preferable AM.
(Forgive me if I'm missing some sarcasm here...)
Why would anybody prefer an AM tuner over FM? Certainly in some markets, there might be value in providing a combined FM + AM tuner. But if I had to pick just one or the other, FM would win hands down.
It seems to me that in the developed world, AM's only remaining potentially viable markets are talk radio and golden oldies. Any reasonably modern music just sounds awful on AM. (It's not ideal on FM either, but AM is just so much worse.)
In my city, most AM stations (even the talk radio stations) went off the air in the 1970s and 1980s when the station owners switched over to FM. The last of the AM stations switched over to FM in 2008. An AM tuner would be absolutely worthless to me.
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Anyway, as far as the remark about the iPod touch not having enough room for an FM tuner... In fact, the iPod touch ALREADY HAS an FM tuner -- it's built in to the same chip as the WiFi and Bluetooth transceiver. As far as space for the antenna... The FM antenna is never built in to the body of portable music players and cell phones. The headphone cord doubles as the FM antenna.