Refreshed internals, lower price point possible.
Firmware Hints at New iPod Touch?
The current iPod Touch carries a model designation of "iPod1,1". iPhone readers may remember that the original iPhone is known as "iPhone1,1" while the iPhone 3G is known as "iPhone1,2". It should be noted that these model numbers don't appear to change for storage differences alone. The original iPhone saw 4GB, 8GB and 16GB sizes but shared the same model number. Only when the iPhone 3G introduced new features, such as a GPS and 3G chipset, did the model number increment.
This would suggest the "iPod2,1" model will carry new features and not simply represent a storage increase to the current iPod Touch. Apple's iPod Touch is currently offered in 8GB, 16GB and 32GB sizes and has not been feature-upgraded since its initial launch in September 2007. Apple did, however, add the 32GB model in February.