We bought an iPod Touch over Christmas, largely because I wanted one, but also because I'd read a lot about little kids being able to intuitively work these things out. Anya gets to play with it for a little while now and then (usually when we're stuck in traffic), and she loves the Cookie-Maker and Cupcake-Maker apps. She also loves to take photos and can easily jump between camera modes and the gallery, as well as flip the camera views around and switch apps. The prompts don't bother her at all - she's not really reading them, but she has worked out how to get most of what she want from most apps. You go girl!
As you can see, the quality of the images isn't all that great, but it is perfect for snapshot moments - and as a creative outlet for our nearly-four-year-old.