It's not complicated. They're doing it to prevent the commoditization (not a word) of the iPod Touch. Keeping the 4G 16GB and 32GB models in the line-up helps to keep the 5G 32GB at a higher price point. Psychologically it will tear down the resistance to the higher-priced higher-capacity model.Looks like they are aiming at a different market now. With the advent of spotify, I barely need 16GB, let alone 32GB of space yet Apple have significantly increased the cost of a touch beyond the scope of a younger adopters.
Any idea why they would do this?