I cant believe that not a month ago after a long hard decision i decided to buy the 120gb version ipod, since i couldnt get my hands on the 160gb version due to being discontinued. Roll on a few weeks and without warning they release the 7th generation 160gb one. I just feel so used, 40gb is a massive increase for the same amount of storage, i just wish Apple would get their act together instead of messing people around, im really not impressed.
I have just purchased the 160 gig and was going for the 120 at first, but the new 7th generation 160 gig was cheaper. You must feel really gutted that you missed it by such a short space of time. I see that the 120 gig is still for sale on Amazon for a few pounds dearer though. It's unbelievable really. Yes, an extra 40 gig is a lot of storage space for free over the 120 gig pod, and I would feel the same as you. The shame and problem is you can't do sod all about it.