Taksim_Red:
Where's the best pace to get one of these cheap then?
I got one for my son a week ago (for xmas) from the Apple store for £170. It's a refurb, but was delivered brand spanking new with all seals and bits of plastic etc. Plus you get the full 1 year warranty.
The 3rd gen one is £60 more. For that you get a faster CPU and bluetooth, but still no camera, GPS or compass (as in the 3GS). (I'd have gone for that one if it had those things.)
I then downloaded (for £3 I think) the latest OS (3.12?) from iTunes, so the interface etc is now identical to the 3rd gen
I've set it up & filled it with apps and stuff and put it away in its box for xmas day

He will then be able to play most of the games I have on my 3GS, and also multiplay with me as it has wifi.