Yes it takes photos.
Quote from apple.
Video recording, HD (720p) up to 30 frames per second with audio; still photos (960 x 720) with back camera.
I wonder if it is a slower A4 CPU than the iPhone. Did he specify the speed of the CPU. And the RAM wasn't mentioned.
I'll bet that the $229 is 3rd Gen.
I'm SOOOO close to getting one of these, Apple really came through. Not a lot of disappointment with me. Mainly, the weak back cam(960 x 720 still pics), no mention of the amount of RAM, or CPU speed(is it the same as the iPhone). I'm not complaining or disappointed.
The website says 7 hours of video playback. I'm probably wrong but didn't the 3rd gen say 10 hours of video playback.