iPod touch is but a stop gap solution to finance future products
The iPod touch would have been useful if any of the following were present:
a) VoIP phone capability to use it as a VoIP handset with the WiFi
b) With 160GB HD, such that coverflow, video and photo capabilities would actually be powerful enough to justify the fancy touch user interface. For 16GB worth of media, the touch UI is overkill
c) as a full Internet access device, the screen is too small
Where all this is going: a truly portable Mac in a ultra-portable brick with a reduced portable GUI on a touch screen, and a full fledged Mac GUI when stuck in a docking station, with hook up to a real screen and keyboard.
For this to happen, though, we'll 100GB+ of mass storage durable enough to stand up to computing use (read/write cycle count, heat, etc.), and a mobile CPU fast enough for at least iWork, iLife, Mail.app and Safari, while being low-power enough to run on a iPod/iPhone size battery.
OQO already goes that path and was founded by former Apple employees, but the price and media capabilities, are not quite there yet. If you look at OQO and Apple's iPhone/iPod Touch, you know where the future is. In the mean time, I'll let others pay for the development. The iPhone has actual value, the iPod touch just gets you bragging rights.