Camera in iPod touch has been rumored for many months. In fact, purported images of the device were also circulated before Apple pulled out a faster and larger capacity iPod touch with no camera. Apparently, two partially working iPod touches recently hit the eBay auction before eBay took it down (assumingly on Apple’s behest).
The two 32GB iPods pictured are marked with DVT-1 and DVT-2 and one even with ‘Apple Development Team’, hinting that the iPods could belong to someone from the team. There’s also another picture that shows ‘Switchboard’ running apparently, on OS build 7C1095a.