I had a problem where when I point a flashlight at the sensor I see 0xFFFFFF on the iPod Touch, but every second or so it would drop down very low numbers. I was looking into possible problems in the assembly code produced by Java Grinder but it looked great.

Anyway, it finally hit me what's probably happening. The flashlight must be PWM'ing and the circuit is picking that up. I hooked it up to an oscilloscope and put the flashlight on low brightness and saw clear PWM going on on the scope. I put it on bright mode (which I was testing the circuit on) and there it was.. PWM also. Not sure why anyone would PWM a flashlight turned on full power (bug?) but it appears this is the issue.

I might make a video of that later...