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As stated above the "iPod Touches is the 2nd generation is a bit slimmer and has a physical volume control dial".
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The Touch also has a speaker for casual listening, if listening to music or any videos for any length of time I recommend earbuds still. The Touch has Nike+ built-in no need for the external dongle.
I find between the free Apps Kindle, eReader, and Stanza the books I want to read are pretty much covered. The iTunes store also sell ebooks but I find those ebooks are expensive and I didn't like App program that was used for the ebooks called Iceberg. There is another called Tree Frog (?), but I haven't tried that one so no review for that one.
I have read a few books on my iPod Touch and I thought it was a good experience. Now if I had the money for a Kindle I am sure I would prefer that, but the iPod Touch works for me.
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The iPod touch isn't a phone, correct?
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Correct
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Do you have to pay for an internet connection?
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No, unless you are at a place or is it just free at places where there is free wifi?" Correct, unless you are at a place where you have to pay for Wi-fi access.
http://www.jiwire.com/ is a good website and now free app to find free Wi-Fi Hotspots.
A refurbished iPod Touch is a good idea. You can check and search these sites to find a deal.
http://store.apple.com/us/browse/hom...od?mco=MTE3Njc
http://www.apple-discounts.com/
http://dealmac.com/
http://www.smalldog.com/
Edit: Forgot to add welcome to the forum.