I currently use RSSRunner to read rss. This has a nice interface, but doesnt download pics etc., I have heard that Pro RSS Reader by simon oualid is good too. These all allow you to read RSS offline.
Off late with iphone 3G prices really low(even 16gb), it is kind of a waste of money buying an itouch; an iphone without a phone plays a real good itouch...So considering getting a 16g iphone and cancelling the phone and pay a minimal penalty..
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