Try powering it off and then turning it on again. That's what worked for me.
Hurray! New iPhone/iPad app is out - Live Chess enabled!
I had upgraded the app last night when it first crashed after selecting live chess -- so I did power it off and then turned it on again --- but it still crashed.
After you posted to the thread --- I figured that I'd try again. The ipod touch was turned off -- so I powered up, launched the chess.com app, selected live chess, got the spinning wheel for connecting and...crash again.

Apple is like a HUGE cult....this message forum proves it.....If Apple pooped in a box would you guys buy it?....dumb question...of course you would......
Of course we would! And if it was Steve's poo... we'd put it in a temple and worship it.

BTW, having the live chess feature on the iPhone is so great. Thanks to the Chess.com team for doing this.

While it's great that Live Chess has come to mobile, can I make a request - I play mainly Online, and that great big orange Play Live Chess button at the top of my current games list is kind of irritating. Live Chess is already available via the Home screen and the buttons at the bottom - do we really need the orange one?
Oooh, and Tournaments and Stats pages formatted for mobile would be luvverly.

Great, I didn't expect live chess to work so well on the Iphone!
I get ads here and there, even though I have membership (gold). Is that supposed to happen?
My iPhone 2g crashes too when i try the new live feature . And I had been waiting so long for this release. Words can't describe how disappointed i am. Please, please, please fix this! Thanks...

Can you try it when there's nothing else (no other apps) running on your phone? I'm just wondering if it could be memory-related.
Also, if you could send me a crash log (deepgreene@chess.com) after the fact, we might be able to figure out the cause. We don't have a huge team of testers, and we don't have anyone testing with pre-4.0 OSs at this point.
Instructions on how to find the crash logs are here.
The app crashes when I select live chess on iPod Touch.