I've got an 2G iPod touch, with iPhone OS 2.x. This means there is software that simply won't run because it is not an iPhone (such as Sleep Cycle), and software which won't run because it is not the 3.x version of the OS (games - at least the Street fighter demo and some others). With an iPod Touch you have to buy the OS upgrades, which I haven't bothered to do.
By this summer you'll have to support the 1G, 2G and 3G versions of the iPod touch, the 1G, 2G and 3G iPhones, the 3G iPhone with more RAM and a faster processor, and the 4G iPhone with both more RAM and a higher resolution. Oh, and the iPad of course.
The biggest new challenge with "iphone 4g" is the higher resolution - some say this will be 960x640 (i.e 2x the current resolution hor/ver), which is imho unlikely as this would be the first use of such a LCD resolution ever.
To me this doesn't sound simpler than the Android fragmentation, at least with Android the market lets you know which apps you can install, and the vast majority actually works with 1.5. With the Appstore you might only get "oh, don't install this on an iPod touch, it won't work".
Android is also more developer friendly, e.g. the new feature introduced just before the 2.2 release - at least my N1 got a "report this crash button" before I upgraded to 2.2. (I don't want to speculate on the developer friendlyness of Apple, but recent news haven't been very good.