I use a 160gig Ipod Classic, got it on Friday Don't realy fancy an Itouch, because the size really is ridiculous, and unless you just want apps/games, than go for Itouch. I just need music, and lots of it ,so I took an Ipod.
Thats why I currently have a 80gig classic, although I only have 14gigs of music at the moment. If I ever fill it, and I probably will, I just buy the new biggest classic ipod. For me its just about the music so unless they stop selling classics I'll never buy an iTouch.
Upgrade it to the newest software, and either get the microphone enabled headsets (which come with it), or some other pair. Then buy truphone from the store, and you can call anyone locally inside your country.