Here's the thing... what's the point in cramming a high-megapixel sensor in such a tiny camera? Sure you get higher-resolution images, but the image quality suffers, as does low-light capability. I feel like between 2 and 3 MP is about right... going up to 5 or higher (the HTC EVO 4G will have an 8 MP camera) is just ridiculous.
When the touch is upgraded to 128GB it's time for the iPod Classic to be laid to rest. Hard drives need to disappear. They have such a high failure rate.