I bought the 1G iPod Touch last month, but decided to upgrade to the 2G for twice the memory (16 GB) for the same price. I'm still within the refund period, so I'll be sending the 1G 8 GB iPod back for a refund. I'll take a hit on the restocking charge, though.
8 GB isn't enough for my needs, and this required me changing the settings everytime that I sync'ed.
Restoring the backup from the 1G onto the 2G worked flawlessly, or as far as I can tell for now. I did cancel the Mobile Me trial, though. The only extra step necessary was entering the WPA password for my Wi-Fi network. Otherwise, all is fine. Even the apps were transferred to the new iPod, picking up where Ieft off in some games.
The 2G now has a rounded back, a rocker switch for volume control, and a speaker which is only useful for alarms or system sounds. You can't really listen to an audiobook or song. The speaker seems to be buried inside with no outlet for the sound, so it has a kind of tinny, muffled quality.
I took a series of photos that I uploaded to my Flickr account (click on the photo above), and I'll go into more depth about the differences as well as review some of the software that I've tried out from the Apple app store. There's quite a bit of useless-ware, but I found a few gems. I'll also try to review the medical software.
Regarding gaming software, Apple is marketing this new generation as the "funnest" iPod. Some games work well but you can't compare it to the Sony PSP.
UPDATE: I also needed to re-enter my e-mail account info, and login for Pandora.