G1 vs G2

G2 also has a speaker, has a nicer shape that feel better in the hand (imo and many others), you are also able to use a cellphone type head set with a mic with G2 to use apps like TruPhone to make voip (voice over ip) on your ipod touch... mic functionality from headset not possible with G1.

I was considering buying a 16GB G1 but I heard that I could get a 8GB G2 for the same price.

And that's a deal?

If you find a G1 new, there is (should be) only a $20 price difference for the same size.
16GB 2G new is $299.
16GB 1G is ~$279. A refurb is $219 from Apple..
8GB 2G is $229 new.
8GB 1G refurb is $179

A 2G will come with the current software, speaker control, longer battery life and it's new.
A 1G (new or refurb) will have old firmware ($10 to upgrade), no speaker, shorter battery life), same warranty as new but it's an older model (new or refurb'd).

Really up to what you want. Speaker is kinda nice but other than that, I haven't heard much difference in performance.

Apple refurbs -> http://store.apple.com/us/browse/home/specialdeals/ipod/ipod_touch