[fh]

AFAIK it's a combination of the hardware not being good enough, and Apple not really trying to optimize for those devices (they'd be happy if you bought a new one). The iPod Touch went through several iterations, just like the iPhone; the latest iPod Touch is actually a bit higher specced than the latest iPhone.

[Tichy]

I didn't know that there are still updates to the iPod Touch.

Would be interested in sales numbers of iPods since the iPhone emerged.

Granted, I bought one, but only as a development device because the iPhone is too expensive.