Meritline has the Mini Microphone Recorder (Black) for Apple iPod / iPhone 3G / iPhone 3GS for $2.50 - $1.50 off with coupon code MLCK262457061060AL1 [200 uses] = $1 with free shipping.
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Purchased one and when you insert it it cuts out the internal speaker.
You can record but to hear what you have recored you have to pull this out.
What a pain, to bad they did not remove the metal contact for the ear buds so that the internal speaker would remain on when using this..