[sumzup]

If you're willing to pay the extra monthly costs associated with an iPhone, get the iPhone. Otherwise, get the Touch. In the US, a data plan is required to get an iPhone; this costs $30 a month (unlimited data). Unlimited texting costs $20, though there are obviously partial texting plans and you probably have a phone and are paying for texting anyways. So even ignoring texting costs, the cost for data will make the iPhone more expensive than the Touch no matter what.

I personally have a Touch (free with my brand-new MacBook Pro!) and I think that I'll be getting the best of both worlds; while I won't have 3G internet or phone capabilities combined with an iPod into one device, I won't be paying exorbitant monthly fees and WiFi service is really ubiquitous. I still have access to all the cool apps, etc; if I really want a microphone, I can get the microphone enabled headphones. I'm planning to get a different smartphone (hopefully one that runs Android and without super-expensive data), so I think I will be gaining more than I am losing. And I don't mind carrying two devices; this is probably personal preference (I like technology and more is always better for me).

In any case, both are fine choices and are very similar. Either one will be an awesome device. (For the record, the iPhone/Touch most definitely outstrip the iPod Classic, regardless of differences in hard drive space). Basically, if you have enough money, get the iPhone. Otherwise, compromise with the Touch, and you'll find that you're really not compromising much at all.