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Almost, but not quite. There are a few other subtle differences beyond the obvious.
The obvious difference is no cellular capabilities at all... This includes making phone calls, using data when away from a Wi-Fi access point, and sending and receiving text messages. iOS 5 will introduce "iMessage" to provide inter-iOS device messaging, but it's unclear whether that will allow you to send traditional SMS messages to other phones (i.e., non-Apple devices).
Other more subtle differences include the camera, which not only lacks the LED flash of the iPhone 4 but also only sports a 0.7 megapixel resolution versus the iPhone 4's 5MP camera, and also lacks features such as auto-focus and HDR photography modes. The video camera resolutions are the same (both 720p), but the lack of the auto-focus features will likely produce a difference in the results you get.
The iPhone 4 also includes an actual GPS chip, whereas the iPod touch relies on nearby Wi-Fi access points for location information. The iPhone 4 also has a brighter and higher-contrast screen with a fingerprint-resistant coating.
On the upside, you can buy an iPod touch in a 64GB capacity whereas the iPhone 4 tops out at 32GB. The iPod touch is also considerably slimmer and ultimately much cheaper than the iPhone once you factor in the costs of a contract cellular phone plan or the contract-free purchase price. Of course, if you're carrying a cell phone anyway that you're able to or willing to replace with an iPhone, the cost of the plan may or may not be a big factor as you're paying that amount every month regardless.