Could they merge the Classic & Touch in a 5th gen?
Problem with a >64GB Touch "as is" is price. A 128GB or larger Flash Touch is perceived to have a price jacked up too high. And even 128GB is still smaller (capacity) than several year's old Classics.
What if the 5th gen jettisoned the Flash and built in the Classic's hard drive? That would get us the big storage so coveted in the Classic with the rest of the "Touch" features so desired... AT a comparable price to current Touch prices.
We have recently seen rumors of a bigger iPod Touch. A bigger Touch would have the room for a hard drive. It would have the room for the bigger battery to cover the added power demands of the hard drive. Etc. Would the market be happy with a bigger screen iPod Touch 256GB (built like this) at around iPod Touch pricing now?
I'm in the camp of still clinging to a 5th generation Classic for the big media storage. I like being able to immediately get to whatever media I want whenever and wherever I am when I want it (without paying a toll to AT&T or Verizon so that I can access it on a hard drive in the sky). Free wifi is not as everywhere (besides, every time I log into free wifi, I am very aware that it's not free bandwidth but bandwidth being paid for by someone else; at any time that someone else could decide to stop paying for it and it would become a subscription-based or pay-as-you-go hotspot (pay attention when you are logging into "free wifi"- even McDonalds "free wifi" is just one of a couple of options that should the "free" offer end, it immediately becomes a paid option at those same locations)). Like "unlimited plans" when 3G iDevices first roll out on new U.S. carriers, such great value bandwidth offers can end without notice. What is free today could be switched to paid tomorrow.
All that said, a merged iPod might be interesting: all the niceties of iPod Touch with the much bigger storage of the Classic... at or around the current pricing of the Touch. The Classic crowd waiting for a bigger (storage) Touch might finally see what many of them want. The existing Touch crowd might see a massive increase as storage as a meaty enough reason to want to upgrade again. Apple loves to sell lots of hardware.