I love my I-pod touch, never really thought of getting one myself, as I didn't think I'd use it, but I got it as a present, and never put it down!
Good point about the I-phone, but I find that my phone goes through a lot more punishment than my Touch, so don't think I'd get the I-phone purely because I think it'd get wrecked - no matter how careful I am!
The way I look at it, I'm always gonna want to upgrade my phone each year, but if I got the I-phone, I probably couldn't do that.