My experience the other night with a friend who was trying an iTouch was that it had no speaker(s) for external music play or alerts(?) and I thought the screen was too small to be really practical for everyday all day use.
If your really interested in photos and/or Movies etc, the N800 is a great size of screen, definitely better than an iTouch...... and I personally like Quiver as viewer for photos. Notably, it has smooth kinetic scrolling and quick switching to full screen viewing.

Headphones are great but I have found the stereo speakers excellent for that sudden moment when you need background music (like a Christmas Dinner) in a location that there might not be any stereo home theatre option.

Oh, the other thing I really like, that I have posted previously elsewhere about, is the video phone.
I think it works through Google Talk and also the Skype works great between units in video and voice over internet too. If you have two, then voila, instant home video intercom. Can't do any of that on an iTouch.

good luck with your decision!