Why can't iPod Touch be used as flash / external drive?

Doesn't it seem like it should be a basic utility to be able to be used as a portable disc / disk / hdd?  My ten year old 60GB Zen Vision:M player has this function (and still works!) but a brand new 64GB Touch doesn't?! 
In iTunes, under Devices>Music in the lower right there is a Settings button...when clicked it has an option to "Reserve space for disk use."  There is also a question mark button to the lower left of that option, which when clicked explains the (to me self explanatory) option by saying "To use your device as an external disk, adjust this slider to set the disk capacity." 
Is there something I'm not doing right?  Why does it even give you this option if it cannot be used?  If not, come on Apple, get it together!  Poor design!

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