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If you need an 3G capabilities then go with the iPhone. However, the iPod Touch is more powerful than the iPhone 4 in all areas. So if you don't need a phone or already have a cheap one, I would go with the iPod Touch.
 
I cannot decide between the iPod Touch 5 or an iPhone 4.

I have T-Mobile so I can get an iPhone touch without the data plan.

The iPhone 4 only has an A4 processor in it while the iPod Touch has an A5 (The new Touch will perform similar to the iPhone 4S). Unless you need a data plan and a GPS, I would go with the new Touch rather then the iPhone 4.
 
I cannot decide between the iPod Touch 5 or an iPhone 4.

I have T-Mobile so I can get an iPhone touch without the data plan.
Well, I have decided that question in favour of the iPod Touch 5, since I'm not using mobile 3G/4G internet and GPS much. Where I live there's usually a free WiFi Hotspot around, and the cost of my occasional paid Hotspot use doesn't warrant the monthly charges of an iPhone contract.

I'm eagerly awaiting my iPod Touch 5 (32GB black, ordered 15 September), so I can put my iPhone 4 up for sale.
 
At current pricing I'd get the 4S if you want a phone.

My AntennaGate iPhone 4 was the worst phone I've owned, the 4S the best of all iPhones, yes, even better than my iPhone 5.
 
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