Having bought one for the youngest at Christmas, I'm thinking of getting one myself:
The VA Hospital Cantina has them and I'm fairly certain they were stocked in the last 8 months.
8mg $199.
16mg $299
32mg $399.
The one I bought for the boy came directly from Apple, it was ~$229. shipped (they charged sales tax, but shipping & engraving was free)

What is a good price?
Where would that great price be?
Are these continually updated in version?
I-pod phone really isn't an option right now  maybe in the next year through Verizon.

That $399 price is the list price of a 64GB iPod 4 that was just announced.  I have a 64GB iPod 3G that is now going for much less.  Check out http://lowendmac.com/deals/best-ipod-touch-prices.html for price comparisons.



 

I suspect the price on them is fixed by Apple, and it doesn't matter where you buy it.  When I bought mine, the price was the same no matter whether I bought it from Apple direct, Best Buy, or online.  Of course YMMV.

There are updates in both the hardware and software for the ipod Touch.  You can get software updates from time to time directly from Apple (iTunes) but you may get some updates that your device won't support.  (same software as for iphone)

You do have to install iTunes on your computer, which some people don't like, but I haven't had a problem with it.  I definitely do like the Touch though, and would recommend it to anyone.

Biggest problem is I'm not too big into Techno gadgets: I have no trouble using Computers, cell phones, GPS, etc, I just don't get very excited by them, and not being an "Apple" user I'm not up on the latest & greatest, version, apps, etc.
After playing with my sons I-Pod I though it would be neat to have on of my own.....then again it might end up in the same drawer as the rest of the high-tech stuff that seldom gets used.
Usually buying directly from the manufacturer gives the best guarantees the latest models, best warranty, and the highest price.

Check out the refurbs on apple.com, they carry the same warranty as brand spankin' new ones:

http://store.apple.com/us/browse/home/specialdeals/ipod?mco=OTY2ODY2NQ

Refurbished iPod touch, 64GB (3rd generation) - $319.99
Refurbished iPod touch, 32GB (3rd generation) - $229.99
Refurbished iPod touch, 16GB (2nd generation) - $189.99
Refurbished iPod touch, 8GB (2nd generation) - $149.99

My buddy bought a couple refurb laptops. Most of the time they are just open packages nothing else wrong with them.

Looking at the 32 gig refurb. seems to be about the best deal if you were planning on a new 8gig to start with; at least it's 3rd generation, and unless I missed something the OS can upgrade to 4th.
Proably don't need all that space, but no one ever complains about having too much.  

I have a 64GB 3G and I would definitely not go below 32GB as you just seem to be able to chew up space without thinking about it.  The 3G can upgrade to iOS 4.x which is important as that supports multitasking and is the future of iOS applications.  The older 2 is single tasking and will not be upgrading.  Some applications are already available only for iOS 4 and up which will become more common.



Honestly, I had zero interest in Apple, iPhone, iOS, etc. until I received my iPod Touch as a gift for my birthday in June.  I have had an old iPod Photo since 2007 that was given to me by some acquaintances because the battery was bad and they were going throw it away.  However, I was not "into" Apple even after repairing it and using it.   For email, web, etc. I used a desktop at home and laptop on the road.  However, once I got a look at the free iPod/iPhone applications available as well as the the ability to link my iPod's mail application to GMail and it's calender to GMail Calendar, I got hooked.  I have both my personal and business email accounts linked in and when I traveled to Canada this summer, I found WiFi at most of the rest stops I went to and was able to check my email and weather conditions along the way.  Now I would find it odd to not have it in my pocket.  I still have no interest in the iPhone as that requires signing a contract with AT&T.  In some ways, the iPod paradigm is the future of mobile computing.  The idea that voice is separate from data is going away.  I can already make phone calls from my iPod Touch using Skype to a real phone number.  Eventually, Google Voice will get approved by Apple and I will be able to make and receive phone calls using that application, needing only a WiFi connection.

Bought a couple 32mb from Costco in the $265 range. Plus tax. Trying to get an app to work between them. Returned them 80 something days later for a full refund, since I could not get the app to work.