I don't really see the appeal of iPods even for the kids. Many parents are giving away their old devices to their kids (with SIM if they are old enough and without SIM if they aren't.) instead of buying them a new device.
Kids straight up ask for iPhones, not iPods because nowadays almost everything, almost always requires internet connection. Just imagine using your iPhone without internet. Yeah, there are offline games but kids like to get on YouTube or play some online social games and IM each other. Sure, iPods can get on the wifi but they are at school most of the time which won't offer wifi for the most part.
My oldest daughter had been asking for an iPod Touch, but wouldn't let her get one until she was 12. An iPod is the perfect device for that age, because there's no way in hell we would give her a cell phone, but she gets to have some of the features of one, without many of the downsides.
And believe it or not, not every parent has an old iPhone to hand down to their kids or WANT their kids to have an iPhone, even without a SIM card.
So your experience doesn't relate to everyone, believe it or not.