3G network is the true incentive!
All this camera and microphone talk is surprising me. Really, it is. Why? Because the iPhone 3G S costs $600. The iPod Touch (16GB for comparison purposes) costs $300. The price difference between those two devices: $300. So where does that $300 price difference get made up? Camera, microphone, 3G, calling abilities. Yet for whatever reason a LOT of people are convinced the iPod Touch will see all these features rolled into it (sans the calling abilities, and possibly 3G yet some still think that is coming). Really? Think about this, you are expecting a $229 piece of hardware (since that is the low end iPod Touch model) to contain features from Apple's flagship phone? For a $0 price increase? Hm, some logic seems off there.
Where is the incentive to buy a iPhone then?
Uberamd, your posts have some good points, but you have to understand that the iPhone is a communication device, and the iPod Touch was first & foremost an MP3 player, but it now is ultimately 100%, a multimedia device.
...so to answer your question, "Where is the incentive to buy an iPhone then?" ...To simplify, right now, it's the AT&T 3G service!
The communication device (iPhone) has a cellular network - 3G. Not having 3G is and would be, a huge product differentiation. One thing in general about GPS and cellphones - is the GPS chip and the cellular network work together. The iPhone's GPS works off of a GPS chip in addition to 3G to give your phone an actual position point. So, GPS in an iPod Touch problably won't happen. It could (theoretically) - with just a GPS chip alone (it will suck though), but to get a true GPS plot, the GPS chip needs the 3G as well. The other issue you raised is a camera. A camera, is by no means at all, even close to what should differentiate the iPhone from the iPod Touch. A camera is a useful feature for both models, and merely the addition of the camera is a smart business decision, because you will have more users buying apps for photos. If they do indeed add a camera, you will see people using the camera and the apps as an integral part of their time & usage. It will be even more clear why - the iPod Touch is "the funnest iPod ever." In the end, you may be right! Apple may not include a camera, but if I were a "betting man", I truly believe Apple has seen 'the light at the end of the tunnel' and will include the camera because of consumer preference, and also because of an overall business decision.
The iPod Touch does not have a communications data plan, ultimately making a huge product differentation. This allows no cellular calls or actual text messaging, and also no 3G service for 'anywhere internet'. The iPod is a MP3 player, and the iPod Touch raised the bar by incorporating some useful features to make it into a multimedia device. You have an MP3 player, but you also have the ability to go buy applications. This is problably the biggest feature of the iPod Touch - the 3rd-party apps. One feature like a camera will not be the sole product differentiation, and more or less, the camera is just a 'want' for a buyer seeking an iPod Touch or an iPhone. A microphone, will be a plus too, but is not even close to the demand of a camera. And if they do have a video, logistically, they need a mic on the actual unit to record audio.
To answer your question, the notion of the incentive to buy is pretty easy and just... so you and I do disagree.
In the other spectrum of 'incentive' vs 'non-incentive' - Right now, the dumbest thing Apple could do with the iPod Touch, would be to make both models have the same amount of storage! The next poor decision, would be to implement 3G at this time because it is still solely for AT&T users (i.e. you're limiting your market). Adding a camera or a mic is not a poor decision, it is a good decision. But, adding 3G and GPS at this time is nonsense for Apple while they are limited to AT&T.
In the end, this is just my opinion. Just like I stated in my previous post (62nd post), if an iPhone was on Verizon, TMobile, etc....I would think differently because there are millions of people who can not purchase an iPhone because they do not have AT&T. Ultimately, making millions of people still want the "apple product." That is a clear market opportunity. In one respect, Apple a couple years back, may indeed knew they needed to create the iPod Touch before the iPhone because they knew there are millions of people who can not get the AT&T iPhone, but would want something very similar. Even though, the iPod Touch came out first, Apple still knew AT&T would limit their iPhone market & acceptance.
...so they released the 1st Gen iPod Touch before the iPhone

The iPod Touch came out first and was for
everyone. And on the other hand, the iPhone came out next and was
limited to AT&T users. ...there is marketing & market acceptance involved here?
...sometimes things are just coincidences, but when you have Steve Jobs at the helm, you are strategically marketing your product!
Steve Jobs is going to capture the world again in September! - A new OS, a new iPod & iPod Touch, and some "darn new cheap MacBook" of some sort is all going to be introduced in the fall, by the one & only - Steve Jobs
Even in this down economy, if I am an Apple shareholder, I want more stock!
CrackBookPro

p.s. that will be my longest post EVER on here

...it took my whole lunch break!
