Okay, everyone try this: turn on your iPod in a closet and walk into a lit room. Everyone reports that the screen grows brighter, but does anyone have a Touch that also performs the reverse? That is, when going back into the 'closet'
D), does your iPod's screen dim itself? I know that it will do this by setting your iPod to standby, and reawakening it, but that's not the point of the auto-brightness. Anyway, please respond.