Mark you totally fail to understand how these things work. Apple don't make the iPod because you find it's the best option. They make it because the mass market wants to buy it. The mass market has made it clear that a device which requires daily charging is just fine, since they generally have access to electricity, and that ~32Gb is just fine as far as storage goes. A minority who demand more space but don't want to pay through the nose may well have jumped to Android/WindowsPhone so they can slip in a128Gb SD card but the sales speak for themselves - people aren't, in general, interested.
You almost hit the nail on the head talking about two devices re: cameras but again fail to realise that for most people, a separate camera is pointless. A minority want a separate camera but it's no longer something everyone buys, more a specialist item. That's the territory the iPod finds itself in now and it simply isn't a big enough market for Apple to divert attention to.
If there is demand, someone else will step up and make one. Given Apple make great profit on the iPod, suggesting they killed it deliberately is silly. They go where the money is, and it's not in storing 256Gb in your pocket.