I love my iPod Touch for games, mobile internet, and apps, but man, for music, the Classic is my go to. It's where ALL my music is (not just the 200 songs or so that fit after all the apps and pictures are on there). It's also where all my pictures and videos are as well.
I NEED the click wheel when I'm doing something else and listening to music. If I'm cutting my grass, on the elliptical, dusting, falling asleep to music, or even studying I don't want to have to look at a screen to touch the right spot to skip a song. Please don't ditch the click wheel. I love my iPods and I love iTunes and the intense control it gives me over my music collection, but if the click wheel is discontinued, my next mp3 player will not be an iPod.
I think the Classic is pretty darn close to perfect as it is. I would have liked to have seen an HD radio or at least an FM tuner added. A speaker would have been nice. I see no need for a camera, and I definitely wouldn't want to see it run iOS. I could see it getting a wifi chip to run simple apps, like weather or a calculator (it already has a good calendar, to do list, contacts, and some fun games).