I bought the 16gb 1st generation this year at Amazon on Black Friday for $199, no complaints. I did spend the extra $10 and upgraded the software to 2.2, so for less than $210 I have basically a 2nd generation 16gb touch- just minus the speaker and side buttons. I have mine in a DLO case, so the side buttons would be no good for me anyway. No regrets, I love my ipod. Even at $219, with the $15 gift card, great deal, use the gift card to update to 2.2 and you're good to go.
No problems with wifi
I have my gmail set up on it, facebook, ebay. It is great.
I have no need for the iphone since I am with Verizon, it would be pointless to have.