I can only post something brief since I'm retiring to bed soon.

For the N800, there's Mytube, and most media programs (Mediabox, Canola) have youtube support.Music Player that can delete songs off of device (UKMP). Internet browsing is ok (default web browser does a decent job.. Tear does it way better).

For the iPod Touch. There's the Youtube app (no flash on the device). So you can only watch Youtube through their app. Both the n00 and iPod Touch can use Wifi (no 3G or whatever). But the n800 has the option of pairing with cell phones and what not.

I personally was in a similar situation a year ago or two (has it even been that long ago?). I wound up choosing the n800 and the only time I've regret that decision is when my cloned partition died (you don't need to clone, but I wanted more space to install programs). I've since learned to backup the partition (relatively easy).

I would determine your decision by what else you will do with the device. Since both do a decent job at what you want (though the n800 has speakers. )