I have a first gen. iPod touch, and I can't use iCloud with it. Why? Because Apple is going greedy. There is no special reason that my iPod touch can't be upgraded to iOS5 other than planned obsolescence. Apple is making you buy a new "device" every 3- 4 years, for no other reason than the profit motive. I don't want to contribute to the landfills by buying into a wasteful, narrow minded business model.
This business model is a slap in the face to customers.