This MacRumors item...

New iPhone and iPod Touch Details? iPod to Get Camera?

...points to this Hardmac.com blog/blurb...

[Rumors] Informations about the Future iPhone and iPod

...which reports on speculation that new models of both the iPod touch and the iPod nano will have integrated cameras like the iPhone. So, let's put a couple of things together...

1. The rumored new iPhone will probably gain video recording capabilities (finally!)
2. We've seen a previous rumor or two that the iPod touch will gain a camera in a future release
3. This latest rumor gives rise to the possibility that the iPod nano will also get an integrated camera
4. Let's assume that the video recording feature trickles down from the rumored iPhone to the rumored new nano and touch devices

This leads to interesting potential head-to-head competition with both the Nintendo DSi (which has two cameras and plays music) and the Flip video cameras.

The iPod touch is already thought of (or at least advertised as) a multimedia capable (music/video) casual game machine. Adding a camera to it would somewhat level the playing field with the Nintendo DSi. A 16GB (or even 8GB) iPod nano with a camera (with video recording capabilities) would be far physically smaller than the popular Flip video camera models with the added bonus of playing music and video (and a few games too). Apple's mindshare and marketing machine would make camera equipped touch-s and nano-s formidable competitiors to the DSi and Flip.