I understand of what you are trying to say, but I disagree with that it take the sale away from an existing Iphone 3GS by selling an iPod touch with 3G connectivity. The Iphone and the iPod touch are always gonna be different even if apple adds 3G to the iPod touch devices. Both devices offers closely functionalities when it comes to features, a closer look at the hardware and software features of each device reveals them to be very different indeed. One has a camera, the other don't. One is meant to be a mobile phone, the other will never be one.
It's like saying that the Ipad(wifi model) product could cannabalize the sales of the smaller counterpart the iPod touch. This is simply not true: The iPad and iPod are completely different beasts when it comes to hardware, software, and what you can do on each device. The Ipad superior 9.7-inch display, has optimized apps to take advantage of the bigger screen. I experience a little bit with an ipad(over an apple store) it's a great device specially safari gains a makeover to look like its desktop sibling. And have you ever tried listening to music via your iPod external speakers? Music sounds weak and slightly tinny--definitely not ideal for an audiophile like me. I was pleasantly surprised by the iPad’s speakers, is a lot better than the iPod touch. Despite of those things,Will the iPad cannibalize sales of other Apple products? Nope, the iPad's size while convenient, won't exactly fit in your pocket. since you won't be jogging with your iPad to listen to music, or answering phone calls with it, I don't see sales of iPhones and iPods being affected much.
My conclusion: Regardless of what apple makes out of the iPod touch this upcoming fall, there are always gonna be consumers that will want different things out of their products--and on with different mind sets. Think of it this way: If apple adds 3G connectivity for data usage, people are always gonna need a phone to make calls and send text/MMS messages.
