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I have heard that they exclude the oldest iPhone from OS 4, and I thought iPod Touch would be on the same technical level as the oldest iPhones. Why does Apple exclude the old iPhones?
AFAIK it's a combination of the hardware not being good enough, and Apple not really trying to optimize for those devices (they'd be happy if you bought a new one). The iPod Touch went through several iterations, just like the iPhone; the latest iPod Touch is actually a bit higher specced than the latest iPhone.
Would be interested in sales numbers of iPods since the iPhone emerged.
Granted, I bought one, but only as a development device because the iPhone is too expensive.