The Touchmods team recently released a working version of their iPod Touch VoIP app, making it possible for Touch owners to place outgoing calls on the device.
The Touch doesn’t come with a built-in mic, so part of the hack involves either modifying a Walmart iVoice III mic, buying a Touchmods designed add-on, or building your own from their schematics. After that, you just need to add http://touchmods.net/rep.xml to the Installer’s package source list, install the SIP-VoIP.app, configure it with a SIP account and hop on a WiFi connection.
Incoming calls are not supported yet, and as far as I can tell this isn’t an open source project. Charlie Sorrel from Wired’s Gadget Lab describes it as being fairly buggy at this stage, and was unable to get it to function, but we’ll see how things progress after a few version updates. Anyone out there with an iTouch who wants to give this a shot and report back their findings?