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I had the same dilemma as you and here's the factsThere are just a few drenfiefces between the first and second generation. The second generation has a built-in speaker and a volume rocker on the side. It also has better hardware which makes it run faster. There is also bluetooth capability that you can unlock with the new firmware (its an internal software upgrade) you can purchase for $ 10. Also there is also microphone capability when used with a headphone that has a microphone built in.In all honesty, its really not that necessary since those add-ons are minor conveniences and the speakers on mp3 players are not that great to begin with.Most people won't notice the difference in performance between the second generation and first generation iPod touch unless you love to play video games on it.