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MacRumors has just posted photos, which they claim are of the front panel of the next generation iPod touch.
According to the supplier who sent MacRumors these photos, the front panel part suggests that the next generation iPod touch will sport a taller 4.1 inch display.
Apple's next generation iPhone is widely expected to sport a taller 4-inch display, so it is quite likely that the next generation iPod touch will sport the taller display.