iTablet (or so it's rumored to be called) is what the 7 inch screened thing-a-ma-jig will be. But thats a rumor. It's like a Mac Laptop without the keyboard. Obviously will have an onscreen keyboard and possibly a mount to use it upright.
Price drops usually happen. Like the 8gb Touch now is $229 but they are dropping the 8gb and making the 16gb the same price. And 32gb will reduce from $399 to $299. Rumored.
120gb implies that the product will have a Hard Drive Memory inside, not a Flash Drive. Touch's run on Flash. And flash drives can only go so big b4 their bulky and useless as a mobile device. So 32gb flash drives are as big as they can get in a small package as of now. It is rumored they will release a 64gb at (the old 32gb) price of $399.
5 - 10 - 20 - 30 - 60 - 80 - 120
1 - 2 - 4 - 8 - 16 - 32 - 64 - 128
So, no. Touch's will never be 120gb. But someday will be 128. UNLESS they revert to Hard Drive but that will add bulk to the Touch and is pointless because, "Why revert to old technology?" It's rumored the Classic's will stop being produced because Hard Drive is becoming obsolete. Which is sad, but Apple will find a clever way to replace it. Possibly only doing this once Flash technology gets higher up there to replace Hard all together.
The next gen of iPods will most likely be:
1. Nano-Chromatic - rumored to have a camera and larger memory (like a 32 gb model)
2. Touch - rumored to have a camera and a larger model (64 gb)
3. Redisigned Classic OR same Classic with even larger Hard Drive memory
4. They most likely wont make a newer shuffle, because the 3rd Gen hasn't been out that long. But you never know!
5. the Tablet
All are usually released in Septemeber. So next month may be a new line of iPod's entirely! (rumored Sept. 9th)
Sorry if this was confusing.