I think they will definitely have a budget model, but there will probably only be one budget model so the buying public doesn't get confused. The 8GB 2nd/3rd gen touch sells so much that I don't think they could afford to raise the base price to $299 (in that if you wanted to buy an iPod touch at a store, the lowest price option you would have is $299). I don't even know anyone with a 16GB or higher, everyone has the 8GB. They may upgrade to 16GB for $199 but if they do it might have less features than what I can see as the premium 32/64GB models. I think they will keep the $199 price point for whatever budget model they happen to release.
I can see an upgrade from 8GB to 16GB though for the budget model, the iOS 4 software takes up nearly 2GB so in reality you are buying an iPod with around 6GB of space (that doesn't include the space that will be needed for future software updates either). As the years go on people collect more music, more apps and more videos so space needs to increase equally with time.
It seems they will do the 8 or 16GB (not both) in one line, and the 32/64GB's as the more premium model. I think this is something we can be 99% sure about.
I think they would lose sales if they started the premium line at $299 and that was the lowest priced option, people look at price these days, and a lot of people will forgo the purchase at that price. When people are shopping (especially uninformed consumers) they look at price and not what the device does. Nintendo's DSi which competes with the iPod touch is priced at $169.99, the DSi XL is priced at $189.99 and even the PSP GO which no one wants to buy is $249 (and other PSP systems are priced lower than that). If apple started at $299, people would just buy one of the aforementioned lower priced products instead or a different iPod such as the nano.
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