Ha! ipods are crap! I bought an ipod and all I've had is problems with it... First it wouldn't turn on... then the screen bugged out (I did NOT drop it) then they sent me a new one and that one's battery meeter is all messed up. I have only had it since last Christmas! I'm done buying Apple.
definitely get the itouch...it has plenty of space for music, plus it gives you the internet, and all that cool stuff...and if you really do run out of space, you can always get an old ipod nano or something for less than 50 dollars...