Compared to what is available in the current maps app, the quality is terrible. And to download that quality of maps to the device would take up way too much space.
The problem here is that they'd essentially be putting hardware in the device and sending the message of "maybe someone will develop something to make this work, maybe not. If so, you can fork out your own money for it." It's a cost that they would have to pay and if it's not used by the majority, it becomes a financial and technological waste.
Compared to A-GPS, it is much much slower. Having the cell towers give a general vicinity for the satellites to work with significantly speeds up the process.
Yeah yeah, I know. The iPod touch shouldn't be just an iPod, but a do-it-all super computer/camera in your pocket
What it
could be isn't the point. What it can realistically be is the matter, and that includes what it can realistically be in the business sphere as well with regards to revenue and profit.
I'm not arguing needs and wants of the person, I'm arguing needs and wants of a product for it to stay competitive... Last time I checked, your iPod doesn't need water to hold market-share. Believe it or not, companies primarially act in their own interests with regard to how much they can profit, not in the interests of their customers. Sometimes these lines cross, though. Point is that the iPod line isn't in need of cameras, GPS, or missile launchers as they don't exist in the competition.
Look at the iPod lines in the past years. Apple has typically lagged behind in terms of specs but they've always kept the pricing high with huge profit margins. It makes no historical sense for them to lower profit margins and add something entirely new into the media player market.
Sure you can add the chip, but if it's just gonna be sitting idle for most people who don't want to spend €xxx on software to utilize GPS, it's a complete waste in production efforts and costs, not to mention the valuable space inside of that casing.
The internal parts of the device are also packed very densely in the casing. There isn't really any room to add another chip without making the device bigger, which is against their general direction of progress.
As it was said a while ago, the iPod touch is a like a set of training wheels to get people used to the iPhone. It's just a nice afterthought and as you can tell by watching some of Apple's presentations, it gets little attention. Now with the iPhone being launched in so many nations, they're going to be pushing the iPhone. The iPod touch isn't really in their lineup to be a flagship device, but it's more likely there to increase the desire in users for an iPhone. And that can't happen if the iPod is literally an iPhone-sans-phone.