Wouldn't it have made more sense to not release an iPod Classic and just have an iPod Touch with a hard drive? If I had a 160GB iPod I'd want to stock it full of movies, but I'd want to watch them on the iPod touch's screen. It's a shame customers have to choose between great functionality and storage space.
I so agree with you, I was also hoping to see the iPod Touch with a hard drive. 16GB is a very poor performance, I would hardly stuff 1/10 of my record collection (yeah, I'm old skool, I like CDs and I just upload them into iTunes), my photos and videos. I'm not going to buy it now.
I guess we'll have to wait another year before Apple decide to merge the 160GB Classic with the sexy looking Touch... but before that happens they might first come up with an upgrade of the iPod Touch with maybe 32GB Flash memory. Who knows...
...and for those who bitch about the price drop of the iPhone, they just got to understand this is part of the game. I guess for us european it's a good news...