iPod Touches are great if you want a handheld gaming device that can also play music. If you don't listen to that much music, iPod touch is the way forward.
However - if you dont want to get sucked in by Apple, here is a list of alternative products that will definitely have a better sound quality compared to the touch. http://www.nottinghamforest.co.uk/javaImages/70/8e/0,,10308~9670256,00.jpg
Wrong link i'm guessing?