Once the iPod touch is jailbroken, it becomes the best MP3 player in my opinion. Obviously the 16gb space isn't going to be enough for most people, but the fact that if I use it anywhere with a wireless internet connection, I can then stream music from seeqpod, meaning that the iPod touch becomes near unlimited in space with a wireless internet connection.
I used it just the other day when a bunch of friends came over, hooked up to my speaker system, and they could just stream any song they wanted. It was like having a 500gb iPod.
Take that along with the fact that once it's jailbroken it has every instant messenger prog, IRC, a Super Nintendo emulator, progs to send files including pictures, songs and anything else, a dictionary, a themer program, a book reader, a maps system which works as a pre-loadable GPS program, a program that lets you control your home computer's music player from anywhere in the house and more.
So yeah, if you're going to get a iTouch, jailbreak it, or it's not worth it. Mine's the best MP3 I've ever had.