Why doesn't the iPod nano take still pictures? Jobs says that the tiny teensy CMOS sensor in the nano isn't up to the quality standards needed for stills; it's too thin. "The sensors for doing a still camera... they are just way too thick to ever fit inside the Nano."
What about a camera for the iPod touch? The product path for the touch, apparently, is that it's a great gaming device and it's the lowest investment option for getting access to the App Store; given that, the push was to get it down to a price point everyone could afford instead of adding new features like a camera. "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." Not to say it won't ever happen.
So much for my idea of a firmware update to the nano enabling still images down the road.