The physical structure of the nano was not able to house the parts of the camera.

If you look at the photo you will see that the screen fills the majority of the top of the nano.

Now the screen is still not thin enough to house the screen and other parts behind it in the case that they use.

The camera had to go where it could fit without moving items that needed to stay.

The internal parts can shift around with no problem but the screen has to stay for the fundamental design of the item.

Since the flash drive technology is advancing so fast the capacity of the drives are getting bigger and the physical size of the drives are getting smaller.
So they probably upgraded the flash drive and had space at the bottom to place the camera.

Better have a camera at the bottom then no camera at all.
Source(s):
Worked at Apple

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