I have been asked quite a bit about what microphone to use for the iPod Touch version of Ocarina. Here is my two cents for both the 2G and the 1G iPod Touch
For the 2G iPod Touch users I would solely recommend the Griffin SmartTalk microphone.
It is small, has a nice cable, and allows you to plug headphones or any other 1/8" plug into it in case you have other external speakers. Most importantly it has a conveniently placed clip that, if you do like I did in these pictures, allows you to position the mic almost exactly where it is located on the iPhone providing a similarly compelling experience. It runs around $20 USD and is usually available at most Apple Stores.
For You 1G iPod Touch Users I recommend the
Macally iVoiceIII Microphone
It's a little bit more expensive, but does the trick quite nicely. Once again, you'll have to have headphones in order to hear. You can get these at Fry's Electronics or on the web.