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With the IpodTouch 2G you can use a microphone [1] , which allows you using it as a skype phone! Here various instructions…. 

1. for jailbroken ipodTouch using SIP-VoIP
2. SKYPE: non jailbroken iPod using fring & micro
3. SKYKE/MSN: non jailbroken iPod using Truphone & micro

It also allows you to actually  record sound. iTalk is a recording app for the ipodTouch 2G/iPhone. It allows you to choose the sample rate and record via an external microphone [2] , that is basically it. Here you find discussion on how to get a mic working through the Headphone Jack.   

For Ipod Touch 1G there’s some interesting report on fscklog (German, sorry….)

Instruction on how to make your ipod touch a sound recording device can be found here.

FOOTNOTES
1.  apple store for In-Ear Headphones with Mic ↑
2.  comparison of mics for ipodTouch 2G ↑