I have an iPod Touch and it is pretty decent for browsing given it's small size. If you do decide to go with it, I would recommend buying another browser though. The built in browser is ok, but there are other out there that are better IMO. Atomic Web browser is what I use.
Also, another thing to consider is the 1st generation iPad. Since the iPad 2's came out, all of the 1st gen's are $100 off. So the 16GB wifi model is $399. Which, depending on which iPod you were looking at, isn't too much more than an iPod.