I have always been nervous about syncing my contacts and pictures to my iPod because they would be accessible by other people if I ever lost it, or it was stolen. I also have never sold a used iPod for the same reason.
That is why I was excited when Steve Jobs announced at the keynote that iPhone 3G would allow enterprise users to remote wipe their devices. I think that is a great idea, especially for enterprise users.
AppleInsider is reporting that the software update for iPhone 2.0 (and presumably iPod Touch) will allow users to securely delete all their files like you securely delete your trash on your Mac. You will be able to get to the secure delete function the same way you get to the “Erase all content ad settings” now:
Settings > General > Reset > Erase All Contents and Settings.
According to Apple, the software that will allow this will be released with the new iPhone on July 11th.
It will take you longer to secure wipe your phone, about an hour. It will securely delete your data, so if you are upgrading to an iPhone 3G, make sure that you upgrade after the software update to securely delete everything from your phone.