Well, for what it's worth, here's my take:
I think that pitching the main reason for the iPod Touch's existence as being a games machine is just wrong!! The games will never be as polished or spectacular as on the other handheld consoles, because that's what the DS/PSP were designed to do in the first place.
<Long sentence coming up - deep breath...>
If I'm faced with the choice of an established, specifically designed GAMES console, with a comprehensive range of complex, familiar titles and with it's controls geared SPECIFICALLY for gaming, and a device which, as *fantastically impressive* as it is, the iPod Touch requires a LOT of input on its games to be carried out using the screen itself, to all intents and purposes REDUCING the gaming experience due to a proportion of the screen being ultimately invisible (as it's under your fingers), I'll take the d-pad and the buttons! Sure, it's a revolution as far as the gaming EXPERIENCE is concerned - just (and this is only my opinion) not as rewarding...
What the iPod Touch SHOULD be, and up until now I think HAS been, is the jewel in the iPod crown - a Jack of all Trades, not just a music player, doing everything it does brilliantly. I think that the camera omission is wrong, and that there ought to be a version which is exactly an iPhone without the phone - for those who don't NEED the phone. For one, if it has the compass feature built in as well, let's see a Zune do Augmented Reality - that could be a killer feature!!
I think that, OK, leave the camera out of the lower spec'd versions - really drive the price down on those and gain a whole new crowd who previously would only look on and salivate! Put a camera in the upper-end ones (remember, Apple is the king when it comes to high end, prestige computing...) and people *will* pay the extra for the killer features that it could bring along for the ride...
And, for God's sake - VGA?!! My crappy Samsung mobile has a 5Mp camera in it!! Come on, Apple - cutting edge! Cutting edge...