I have an iPhone 3G. Here's what the 2nd gen iPod Touch lacks:
*Cellular radio (duh)
*Camera
*GPS
*Microphone (although you can add this to the new Touch by buying an iPhone headset)
*Good speaker (the Touch has a very weak internal speaker, an doesn't even have an opening for it so the sound sounds weak)
*Free OS upgrades (every so often Apple releases OS updates, they do not charge for the iPhone but they do charge Touch users)
*Not jailbreakable at the moment
If you can afford it, get the iPhone. It's infinitely more useful. Just the ability to web browse anywhere is so worth it.
Also, you cannot not pay for 3G if you have an iPhone 3G. At least in the US with AT&T an iPhone 3G data plan costs $30/month, and that's on top of your voice plan.
An iPhone EDGE (2G) data plan costs $20/month (and comes with some amount of SMS, I'm not sure how many), so if you get one of those, that's a little cheaper.