You're right. You cannot use Ziphone on 16GB iPods. The only way right NOW is to downgrade to 1.1.1, and do the software jailbreak but, if you wait 1 more day, I think you'll change your mind on how you want to go about jailbreaking.
We'll see about that this evening, but honestly, I just went through the JB process (ahem, twice, actually, since I changed the default root password, which should definitely not be done since it crashes SpringBoard), and with ZiPhone, it's a real breeze.
The second time around, it took me about 1 min to jailbreak, 5 mins to add the apps I wanted to the install queue, and the device took maybe half an hour to install everything while I did something else.
I originally intended to wait for the SDK announcement, but it looks like we're not going to see many apps soon, and besides, it's unlikely they'll offer the kind of low-level access you can get with a JB device.
I'll switch to "official" apps if and when they're released, but in the meantime, I'm enjoying the vast quantity of available apps, from wifi scanner to pdf viewer, and including that nifty AFP server which displays my Touch in Leopard's Finder just like any remote disk
