A post by ‘ghostinthecomputer’ says Apple should kill off the iPod touch. It’s an interesting idea, which Daring Fireball’s John Gruber largely agreed with, but I’m unconvinced.

The iPod Touch has always been a bit of a strange device, basically a stripped down iPhone, without any phone or cell data capability. It was called an iPod, but was completely different from Apple’s older iPods that focused almost solely on music.

This much I agree with, but I wouldn’t call the iPod touch ‘strange’, since it’s essentially a small, wireless computer; its name is perhaps troubling, but understandably leveraged the insanely popular iPod brand. But it’s no more an iPod than an iPhone is a phone.

With the coming fall event, this is Apple’s opportunity to make a trademark dramatic move and kill off the iPod Touch from their product line. However, they shouldn’t just leave a void where the iPod Touch once was, they should replace it with the much rumored low-end iPhone. The low-end iPhone would fit perfectly into the market where the iPod Touch was, and in many ways would be better than the iPod Touch for most consumers.

First, if the low end iPhone sold, without a contract, for around $200-300, it would be in the same price range as the iPod Touch, and would draw the same buyers.

This is where the argument starts to fall apart. Apple will have to be extraordinarily aggressive in terms of pricing to meet that target. Right now, the previous generation iPhone is £428 in the UK. The low-end iPod is £193, but that also, unlike the low-end iPhone 3GS, includes FaceTime, a Retina display and HD video recording. At present, then, the iPod touch at the low end is a generation ahead of the closest equivalent iPhone and still under half its price. I’m sceptical Apple will suddenly bring all its iPhones into line and scrap the iPod touch and reduce its profit-margin sufficiently for the low-end device to remain competitive. Additionally, Apple would have to fight a perception battle: people still shop for iPods, notably for kids; they don’t want their kids to have an iPhone. Others are happy with their smartphone but still want a device that’s capable of playing music and running iOS apps. This sales and marketing shift alone could cost Apple a ton of sales.

I don’t disagree that there are benefits to the iPhone-only approach. You’d end up with an ‘iPad mini’, to which you could add 3G; you’d stop people questioning whether to go for an iPod or iPhone and then buying neither, due to confusion; and you’d—potentially—finally end up with a low-end device that had a half-decent stills camera. But you’d remove Apple’s most ‘throwaway’ iOS device; you’d have no option but to ditch the iPod’s super-thin form-factor; and you’d have people paying for the phone components, whether they used them or not. To me, I’m not sure that sounds like an Apple strategy, and I’m guessing within the next few weeks we’ll hear announcements about the new iPhone 5, an 8 GB iPhone 4 becoming the low-end model, and a new iPod touch line.