There's an iTunes app out now that can turn your iPod Touch into iPhone -- well, close it at least.
It's called TruPhone --
"The new Truphone for the iPod Touch application works on the 2nd generation iPod Touch and enables you to make FREE calls to other Truphone or Google Talk users from any Wi-Fi zone, using your iPod Touch's internet connection and a headphone with mic, or mic adapter."
Watch this clip to see how it works:
You can download TruPhone for free at the iTunes App Store.