Wow...lots of posts since the last time I put thought into this...
Yes, I have heard the rumor of FM in the iTouch. I know the hardware has been there for a long time, just apple was to lazy to enable it or maybe they didn't, due to accessory contracts with third party vendors.
I have been doing comparison research to help make a decision.
I will list the plus and minus points I have with both the Zune and iTouch
Zune
+HD radio
+Superior audio quality
+Can synchronize wirelessly (very important)
+OLED (Rich blacks and vivid colors)
+HDMI output for 720P HD monitor in back seats
+Cheap dock would be easy to modify
-App store is as good as non-existent yet (but is supposed to change soon)
-No bluetooth (no odbII possibility or GPS, etc)
-Cannot stream web radio (must be saved as podcasts)
-0.2" smaller screen
-No knowledge of serial protocols for communication (no steering wheel controls)
-Pinout layout not well known yet (but can be easily traced via dock)
iTouch
+Bigger screen
+App store
+Can stream wireless webradio (with app)
+Bluetooth (GPS app, ODBII app, etc)
+Pin outs well documented
+Serial protocol well documented (steering wheel control)
-Cannot wirelessly sync to iTunes (I'd like to synchronize while parked in garage overnight)
-No FM yet, just rumor that apple may finally enable it
-Hardware has wireless-N, but also not enabled

-Cheap docks have stupid angle and most require breakout cables
-Unknown if iTouch can display video to an outside source (can someone chime in)
-Old school style LCD (LCDs start to get halos around the edges with age)
These are plus and minus points I could think of for the general public.
For me, I could easily live w/o bluetooth, but I really would like to be able to stream web radio when at work or outside mowing my lawn.
For now, I am still more biased to the zune, but that could easily change if someone with an iTouch or iPhone could answer me these questions.
1) Can the iTouch/iPhone play video to an external monitor, but still display menu controls on its screen?
2) Can the iTouch/iPhone be wireless synchronized if jail broken?
3) Is there a dock out there that does not have that extreme angle when the iTouch is docked?
Until I know all answers for sure, I am not going one way or another. From what I hear, both apple and ms are going to do major updates in Nov., just before x-mas season.
Just for kicks also, how many of you would like a iPhone/iTouch head unit system and how many would prefer the Zune? Just wondering if I could at some point build a low cost kit.