I sold my iPod recently and picked up a Nokia n800, with two 2 8GB SDHC cards (for a total of 16GB storage). It´s a bit overkill if all you wanted was the functionality of the iPod Touch, as it runs linux and can do almost anything that a P3 laptop can do, including VOIP, native youtube, or a great mapper that hooks up to a bluetooth GPS unit. Plus, it is possible to use bluetooth headphones for music, or a bluetooth dail-up connection with your cell phone for areas that don´t have wifi. There are a few really cool music players like kagu and canola that will find all of the music that you have on your device (canola finds pics and video too). And almost everything available for this is FOSS.

In short, it´s way more flexible.