Steve Jobs has stated that the reason iPod Touch does not have a camera, is because it's a game machine, therefore you have to make it as inexpensive as possible.
"Originally, we weren't exactly sure how to market the Touch," Jobs told The New York Times. "Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine.
"We started to market it that way, and it just took off. And now what we really see is it's the lowest-cost way to the App Store, and that's the big draw. So what we were focused on is just reducing the price to $199.
"We don't need to add new stuff. We need to get the price down where everyone can afford it."
So there you have it. No camera on iPod Touch. If you have to have that feature, the redesigned Nano has you covered.