OK, so here's what it NEEDS:
-An OS that MAKES SENSE; I understand that Apple limiting options and stuff for the user make it harder for you to completely mess the thing up, but they need to have their OWN method of unlocking (similar to jailbreaking) so people like me can install the apps that are actually worth having, like Winterboard, MobileFinder, Torrentula, etc, without having to jailbreak the device and, "void the warranty." The ability to manage ALL filetypes on the device would be nice (music has been specifically mentioned in this thread). Added codec support (not hard, there are apps for the jailbroken software that already have added support). Better picture management: why is that my 240+ photos in jpg format take up 12MB on my CompactFlash card, which I can pop right into my Windows Mobile 6 PDA and read, take up 165+ MB on my iPod touch, in a LOWER RESOLUTION?! I SSH'd a 55KB jpg with the title, "IMG_0010.PNG" and a copy of it as, "IMG_0010.THM" and it showed up perfectly on my iPod touch, taking up only a fraction of the space it would otherwise use. I didn't change the file format at all, just the name and extention. And the apps like AirSharing allow direct copy and direct reading of jpgs, which is beautiful. For all the crap Microsoft gets (and I don't like Microsoft), they've had C&P on their mobile OS for YEARS, plus the ability to use removeable media, which makes file management SOOOOOOOOOOOO much easier. Folders for apps, instead of a stupid, 9-page limit. If there weren't TOTALLY AWESOME games for the iPod touch, I wouldn't have even thought twice about getting one; without games, it's a piece of crap next to my PDA.
-Everything the iPhone has, minus specific phone capabilities (text/MMs, 3G/EDGE); camera, microphone (for OS 3.0 voice notes, apps like that Steam app, or whatever it's called, and the Zippo lighter app, etc.), Bluetooth for A2DP, keyboard, etc.
-More RAM; my Windows Mobile PDA can run a better music player, IE mobile, File Explorer, AND Opera Mobile (with multiple tabs) and have more RAM left over than an iPod has, just from the home screen.
Here's what I WANT in the iPod touch:
-An OS that MAKES SENSE (see above); the music and video players should be able to search the device for audio files, or let you set specific folders, like on desktops and in Windows Mobile, and that should be used in combination with the following...
-Removeable media (SDHC, micro SDHC, whatever); this would allow for them to only have to manufacture ONE device, with, say, 8GB of built-in, and a micro SDHC or full-size SDHC (I'd like full-size, less expensive cards), then getting extra memory is cheap, and the device would appeal to a whole additional set of geeks, that it otherwise wouldn't appeal to. Heck, if they had support for SDIO, then people whouldn't need to complain about not having a camera, just buy one like
this. They could up the price to $270, or perhaps $300, with relatively little money put into the technology, make just as many sales as they otherwise would, but have additional sales from people like my dad, and his boss, who use memory cards and take pictures all day.
That's all I can think of now, but I could've put that into some long lists of little things. Meh, whatever. The OS 2.0 sucked, the OS 3.0 will suck a little less, via copy and paste, but that's about it.
EDIT: A couple people said that they want higher resolution, OLED, and lower price. The only way to get all of those, is to...um...wait 10 years for the cost of OLED screens to come down. Even at the current resolution, using an OLED screen would make the 8GB model cost $1500, IF you're lucky. Sony has a 10" OLED screen for $2500, and that's just a screen, with HDMI input, USB, and one of their own MS card slots. Apple overprices their stuff just as bad as Sony, so OLED screens right now are out of the question.