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Or you could just buy an ipod touch, if you don't need GPS or camera features.

You still need to go through the same provisioning process to run dev code on an iPod Touch.

Really? I know I've hooked up my touch via usb, and there it is in xcode. A heck of a lot simpler.

You still need to have a developer certificate set up and installed if you want to install any applications on your iPod through Xcode.