i got an ipod nano 3rd/4th gen and itouch 3rd gen..my advice would be to get the itouch
you get a neat little video camera & radio with the ipod nano..but the itouch gives you so much more stuff to do..im sure you have a general idea of what you can do
the cons from a nano to itouch..
1) no wheel!
2) to skip a song, you have to be able to click the skip or if you wanna go back, you have to do the same. that was vague but essentially, if you wanna change songs, you have to be able to look at the screen or know it good enough to be able to press/move the correct stuff (i use the autolock feature so everytime i wanna skip a song, i gotta unlock it and sometimes enter my pw..)
3) summarizing num 2..harder to navigate the songs. also, if you're looking at the now playing screen on the nano and you press the center wheel, you can choose to start genius, browse artist, album, etc. but you can't do that with the itouch. you gotta go to the artist tab urself instead of using that menu. (you can go to coverflow by turning it but that's just to get to albums)
uhhh the stuff up there looks quite sloppy...but yeah i suggest an itouch (of course, im still using an outdated phone soo...the itouch counteracts the stuff my phone can't do)