OP, in my opinion, the thinness of the new touch did not cause the compromise of the camera's quality; Apple put a worse camera in the touch for cost savings and to draw a dividing line between it and the iPhone. Same goes for IPS, because if they really wanted to, they could have shoehorned it in.
The simple fact of the matter is that iPhones are more profitable than iPod touches.
Other than that, I agree with you. I see the thinness craze across most of the portable gadget space. My HTC Incredible, for instance, is far too thin and light in my opinion. I feel as though I am going to break it at times from the slightest drop.