Cheaper, and no smudges. And you can hover over stuff and see what you're doing.
Why doesn't the iPod Classic use a touch screen? That click wheel takes up like half the space.
For the hell of it.
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It doesn't really work for me. I'm a sucker for interface design, and I think you won't get away with a non-multitouch interface. Just make the outwards appearance even better than the iPhone's and you have got yourself a winner.
It's not bad, though.