So, the Ipod Touch vs the Iphone...

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You can safely say that the iPod Touch is an iPhone without the Phone part. As has already been mentioned, the new revision introduced this week even has a built-in speaker and support for a microphone. All revisions always had full WLAN support (which works very well).

With firmware version 2.x, the iPod Touch is compatible with Apple's AppStore and thus allows for the installation of third party software.

Mail became available with the January 2008 applications update which needed to be purchased for 20 USD. Since firmware version 2.0, which also needed to be paid for around 10 USD, Mail has Microsoft Exchange push mail support.

Those apps have been around since firmware 1.0:
Safari
Calendar
Contacts
Clock
Calculator
Notes

The online apps Maps, Stocks, YouTube and Weather are also on it.

Of course, it is a video, photo and music player.

Useful third party software that I recommend for installation:
Currency (free)
Light (free)
FileMagnet (not free) - allows you to read PDFs, Word docs and other files on your iPod Touch or iPhone


WARNING:
Apple's DRM is a ROYAL PAIN IN THE BUTT. "Synchronizing" an iPod means ERASING ALL DATA on it and copying the contents of the current computer's iTunes library to it. Duh!

And you can ONLY copy files that you've bought on the iTunes store from an iPod to your computer; iTunes won't even let you copy DRM-free mp3 files from the iPod!

And the worst part: Neither the iPod Touch NOR the iPhone can be used like a normal USB stick or external hard disk (that's only possible with the iPod Video). So you cannot plug it to your computer and store stuff on it without iTunes.

As mentioned above, Apple likes to charge iPod Touch users for firmware updates. I've already paid for two of them: The 1.1.4 (with apps) update and the 2.0 update. It is noteworthy that I bought my iPod Touch in January 2008 and still had to pay for the January 2008 software update. Isn't that customer friendly?

Apple's AppStore policy is a chapter of its own: You cannot just upload self-written software to it; Apple wants to approve everything first, and it has happened that software magically disappeared from the AppStore without even informing the author --> just look at Nullriver's Tethering software.

If I had known this to this extent when I bought my iPod Touch, I would have left it where it was. Apple's product policy around their iPod/iPhone gadgets has Orwell-like dimensions and the devices are only fun for a few minutes; the moment you really want to use them for something other than listening to music or watching a (QuickTime-format-only) movie, you quickly realize that you just CAN'T. These things are not the PDA they seem to be from a distance, and the word OPEN does not exist in Apple's dictionary.

Although I am more sold from a user's perspective on Macs and OS X than I ever was on PCs and Windows, I cannot recommend purchasing iPod or iPhone devices with clear conscience.