[Griffinaz]

The main questions you should ask yourself are:
Do you want to carry around two seperate devices all the time (phone and iTouch)?
Do you need 16 Gigs of room for music that you have to have with you at all times or would 8 be enough?
Do you usually stay in areas of your town/city that have public access wifi available? If not, do you want a device that you can only use within Wifi range of your own house?

The main difference between the two devices is the phone and the ability to have access to the internet over the Edge network (not fast but not dreadfully slow in most cities) without having to be tied to Wifi locations.