Shut Up.
The iPod Touch 1G cost 155 dollars to make, and it retailed for 249 at the time.
So if the iPhone 16GB cost 183 to make (with Cellular internals and unnecessary equipment), it would be approx 150 - 160 dollars to make an iPod Touch 4G.*
That means the pricing would be starting at 249 or even 229.
It retailed at $299. If the iPod touch costs $160 to manufacture, and you want to have it sold at $299 for how much would Apple sell it to retailers? The shipping costs, chinese labor (cheap but still applicable), R&D. Not much room for profit. If I had to guess, I'd say that it only goes in the upper two iPod touch models.