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Now that Apple has just released a new version of the fifth generation iPod touch with a camera and color, does Apple not intend to release a 6th iPod touch?

Most likely they will release a 6G in Sept/Oct.

They have the ability to upgrade processors and camera, etc. The newest 5G is just the stepping down of the 5G into the lower-end product version, the higher-end versions will revise to something better in a couple months.
 
I think they're leaving it alone until next year.

I was at a friend's daughter's birthday party last week. Most of them were running around with 5th generation iPods. It's definitely a dying product for the older crowd, but parents are buying it for their younger kids who are not ready for a phone yet.

Those kids will most likely end up buying iPhones when they're older. The cycle continues. :D

I wonder how much the demand really is, though. If I were a parent with a kid old enough for an iPod, I'd probably hand them down my old iPhone (SIM-less, so basically an iPod touch with a huge battery) when I upgrade.

The same thing, actually arguably better since the iPhone has better battery life and can make VoIP calls, and costs me $0 additional. But as you say, you see lots of kids with iPods so maybe most parents don't do this.
 
A few years ago, the iPod touch was very popular, even at 14-16 years old we all had them (2g, later on 4g), nowadays everyone aged 10+ has some kind of smartphone - be it an Android phone or an iPhone...

Does that mean that I'm under 10 years old since I don't have one :D (you did say everyone).
 
Just bought a 64gb 5th gen ipod touch. Hope it would last at least a year before apple releases a real hardware update for it.
 
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