Well, it's stupid of Apple to keep a 8GB model, since most of it is eaten up by the iOS4. So, chances are they'll change it to 16GB. This means they'd have to make a whole new line, so why not 4th generation? Even if it stays 8GB, your reasoning is only somewhat right. An entree low end for iOS would have to be a 4th gen. You know what entree to iOS means, right? That it will be ready to run iOS4. This involved retina. As for price, it would only cost Apple 28.50 more per touch, they'd still make 70-150 dollars per product. Obviously iPhone 4 costs more than 3GS, which is a given since they changed it. So now, would it not cost more for the iPod touch? Apple kept the prices the same for iPhone per GB size, so why not iPod touch? Also, you seem to forget it's an iPod. I can not stress the POD part enough. Not an iPhone. So don't make comparisons to it's price and form factor.
Yes, I agree they will likely make the base model a 16GB model. They did create an 8GB iPhone 3GS shortly before iPhone 4 came out. I don't agree that retina = iOS4. I think iPhone 3GS and iPod touch 3rd Gen run all features of iOS4, except Facetime, FT does not hinge on Retina display but more the front camera.
The analogies to iPhone are as follows:
1st gen release - same models across the board separated only by capacity
2nd gen release - same models separated only by capacity
3rd gen release - base model was a 2nd gen model, 3rd gen models at the mid and high end.
The above is true for both iPod touch and iPhone.
For iPhone 4:
4th gen release - base model was a 3rd gen model, halved in storage capacity at lower cost. 4th gen models at the mid and high end.
This suggests, that for iPod touch 2010 - base model will be 3rd gen model, halved in storage capacity to 16GB and cut in price, likely from $299 to $199.
Apple is perfectly happy selling iPhone 3GS with iOS4 without retina, Facetime, A4, etc. They would be perfectly happy selling iPod touch 3rd gen with iOS4 without all that either. They're going to want to make us pay for all the goodies that the 4th gen offers.
For $199 today you get 8GB storage, slower CPU, no multitasking, and 128MB RAM. For $199 in Sept, going with a 3rd gen model, Apple would offer 16GB storage, faster CPU, multitasking and 256MB RAM. I think Apple would argue that's a good enough upgrade for the low end model.