I agree that used strictly in its iPod capacity, there isn't enough memory. Especially when I'm traveling, I like having my entire library at my fingertips, which I currently do with my 5G, except that I always have to weed my video content to make it all fit, so a device that's better for viewing video but holds less seems unlikely to replace my 60gb 5G. The 160gb 6G, however, is very tempting. However, the iPod touch wouldn't have to replace my 5G. On any given day, I largely listen to my latest podcasts, my favourite tunes, and the stuff I most recently added. I could easily fit a day's worth, probably a week's worth, of content in 16gb and use the 5G for longer, out of town trips, but the only reason to do that would be if the other features of the iPod touch were useful enough to make it worth leaving 90% of my library at home every day.
Does the Touch include an e-mail app? I didn't see that mentioned, but it seems important and easy to integrate. I know I could use web-based e-mail, but firing up the web browser for that seems unnecessary.
And a chat client still seems to be missing, which is even more important when you don't have SMS to fall back on.
I would still like SSH access to my home machine, but I guess there's probably not enough demand for that, though it's hard to imagine it'd be difficult to integrate if this thing's built on OSX like the iPhone.
As tempting as the iPhone is, I just don't think I'd use my 24/7 connectivity enough to justify the hundreds of dollars I'd have to spend on the data plan over the course of two years. But finding a wi-fi hotspot is usually easy enough (I'm soaking in one right now), so if the iPod Touch would offer the feature(s) of the iPhone that aren't dependent on a cell service, like e-mail, and the features that seem to be missing from the iPhone, like a chat client, I could see this easily becoming my new daily iPod. But as it stands now, I'm not sure. If I was going to run out and buy an iPod today, I might prefer getting an extra 100 gigs rather than being able to browse the internet and see who's currently playing at Starbucks. It's close, though. If there was VoIP solution, that would probably tip the scale, 'cause I may spend 8 hours a day soaking in WiFi, but I get no AT&T reception here.