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September is a month that brings "music" to the ears of Apple fanatics and others alike. It comes three months after the yearly updated iPhone announcement, which happens every June. So basically, by this time all the buzz and excitement (or boiling anger, if you look at the iPhone 4 antennagate issue) has died down and it's the perfect time to draw consumers to their music related products. Last year this time, Apple shot our enthusiasm down by not giving a camera on the iPod Touch, and gave the iPod Nano (a mediocre) one instead. Also, while the higher-end (i.e. with 32 or 64GB memory) iTouch models got an internal hardware upgrade that made them faster, the cheapest 8GB Touch still ran the slower iPhone 3G-like hardware.
Will Apple add everything that people have been dreaming in the iPod Touch this year? What else can one expect to be launched alongside? These are our educated guesses:
iPod Touch with iPhone 4 internals
This cheap subsititute that provides an iPhone-like experience is in dire need of an upgrade. By logic, we'd say the cheapest iPod Touch 8GB model will receive the hardware upgrade of the currently high-end iterations we talked about. So we're talking of the iPhone 3GS grade hardware on the 8GB model. We feel strongly about this because of two reasons. First, if you're the current owner of a 2nd generation iPod Touch or even an iPhone 3G, and have upgraded it to iOS 4, then I'm sure you'll share my disappointment with the lack of key featuress of iOS 4 (a.k.a Multi-tasking) not being supported for these models.
I guess it's fair since the older hardware wouldn't have smoothly operated multi-tasking. If that wasn't enough, many users of these older devices (myself included) have reported that the device lags even worse when updated with iOS 4.
Secondly, they were giving away free iPod Touch 8GB models with every Macbook purchase by students in the US (Yes, I'm one of the lucky who got that deal). This could only mean they are clearing stock of the old 2nd generation in an attempt to phase them out completely. Lastly, since they've already discontinued manufacturing the iPhone 3G, but still continue to sell the iPhone 3GS alongside the newer iPhone 4, putting the 3GS hardware into the cheaper iPod Touch would logically make manufacturing it easy. 
Now for the top 32GB and 64GB ones; we have no concrete evidence, but I believe there is a possibility of some of the core components of the iPhone 4 trickling down to these. Stuff like the 960 x 640 pixel "Retina" display, the 1GHz A4 processor, the front facing camera, the gyroscope and probably even the new design. Fortunately, there won't be dropping of bars on it, no matter which way you hold. Seems too good to be true?
Let us remind you of what Steve Jobs said last September when asked why the iPod Touch didn't get a camera back then, "The iPod Touch is a great game machine". And with that lame response to the question, Jobs did make it clear that they're pitting the iPod Touch as a gaming device. The iPhone 4's awesomely crisp Retina display will make games look better and its really fast hardware will make them run faster. And the gyroscope, which detects pitch, roll and yaw movements, was pretty much added in the iPhone 4 to enhance motion-based games other than anything else.
So, having the combination of these components in the higher-end iPod Touch models will not only enable a better gaming experience, it would also justify the extra 100 or 200 dollar asking price of the 32GB and 64GB models respectively, when compared to the cheapest $199 8GB model.
Lastly, will we finally get the camera on the iPod Touch this year? We can't really say about the back facing 5 megapixel shooter on the iPhone 4, but we definitely feel positive about the front face video-call camera being included. As of today, the iPhone 4 supports video-calling to other iPhone 4 devices over Wi-Fi only. The iPod Touch already has Wi-Fi, so putting a video-call camera on those higher-grade models will take their "Facetime" video-calling feature to a bigger scale. 
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