The iPod touch is missing:
- GPS
- Bluetooth (iPod Touch 4G has Bluetooth)
- Cellular network
- Camera (iPod Touch 4G has front and back cameras)
- Microphone (thanks John Topley) (iPod Touch 4G has headset with microphone)
- Vibration
- The 1G is lacking a speaker
On the plus side it weighs a bit less and is a bit smaller.. Other than that they are pretty much identical (no sarcasm here; it still has the same processor, OS, control system, and display) Personally I would get an iPhone, as you will probably end up getting one later on anyway. I have an iPod touch (bought first) and an iPhone. I never use the iPod anymore.
The iPod touch is obviously cheaper than the iPhone, and there is no contract necessary. However, at least in the UK you can get a contract-free iPhone, and you should be able to do so soon on AT&T in the USA.
There are no extra costs besides the $99 for application development (which is a yearly fee)
We are developing from the UK. One issue to be aware of when you eventually sell your application is tax withholding - Apple will retain 30% of your revenues. There are some forms you need to fill out - I dealt with this in another thread. Here's what I wrote there:
You need to fill out a W-8BEN and give it to Apple to avoid a 30% tax withholding. This requires that you have a SSN (Social Security Number). If, and only if, you do not have an SSN, you may supply an ITIN (Individual Taxpayer Identification Number) or an EIN (Employer ID Number).
To get an ITIN, you need to fill out form W7 and submit that to the IRS.
The GPS radio is only accessible through the Core Location API, which will give you a latitude and longitude fix to your desired level of accuracy, but does not provide any low-level access to the radio. The ANT radio is not available using public APIs, although it may be possible to talk to it on a jailbroken phone. Any such application could not be distributed through the App Store, however.
Best Answer
I believe game publishers had to work directly with Apple on "classic" iPod applications - here's an article with an EA dev.
Our talented teams here at EA Mobile first develop the games and then we work with Apple to do the final integration and testing on the iPod. To get ready for the launch, some of us practically lived in Cupertino. We even had to maintain the same level of secrecy while we were at Apple headquarters.