I would decide on what you want to use the device PRIMARILY for -- if it's as an eReader go for the nook, it has the bigger screen, yes? Then you'll have a device with a bigger screen that will also do everything that the ipod touch will do. If its for portability and music, go with the ipod. It will also function as an ereader. I have a kindle that I love so I'm more of an ereader girl.. but I'm getting my son the ipod touch for christmas because he wants something to take with him to play his music on.
Plus.. the Nook is less expensive - right?