So.... This is my project. I have a phone and no need to buy and iPhone so I will be getting an iPod Touch 3g. It does not have a camera so I guess we will be making one! So I have headphones with the jack and i have an old as phone with a good quality camera. If I take that camera and wire it up with a mini motherboard or something and wire it to the jack I could make an appto take pics with that. That was a lot to swallow so here is a diagram.
ETA: I could also use a dock connector instead of a jack or both