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2nd Generation iPod Touch Faster than iPhone
In part, the differences stem from the fact that the 2nd Generation iPod Touch had its processor quietly boosted to 532MHz. Meanwhile, the iPhone 3G, Original iPhone and 1st Generation iPod Touch run at 412MHz. However, the differences must extend beyond this simple change, as there seem to be substantial performance differences between the similarly-clocked models as well.
From Handheld Games Corp's experience, the 2nd Generation iPod touch is the fastest model "by far", followed by the iPhone 3G, iPhone and finally the 1st Generation iPod touch lagging behind (at least with respect to 3D gaming). Due to these differences, Handheld Games Corp's CEO does not recommend anyone interested in gaming to even consider buying a used 1st Generation iPod touch.