Ah, the loose lips on those 3rd party case manufacturers. This time we're seeing what looks like an iPod case with a hole cut out for... yes, a camera. Macrumors has a few juicy shots of both nano and touch-sized iPod cases with said holes. These match up with sketches reported by iLounge back in May and rumored by HardMac before then.
Personally I think it's brilliant and logical to add a camera to the nano and I doubt a touch with video would scuttle many iPhone sales. More importantly, the touch is likely to get the same "upgrade" treatment the 3GS did: oleophobic screen and speed boost. Adding a camera just turns the touch into what people wanted anyway: pretty much an all-in-one device.