I looked into this. It's honestly way more economical and sensible to just get a refurb'd Garmin for $79. You're going to pay more than $100 to make your iPod touch do the same thing, and possibly not as good as the dedicated Garmin unit will do.
The iPod Touch, including the new 4th gen, can make a good navigation device, as long as you keep in mind the limitation of not being able to download maps and POI data when away from a WiFi connection. There are two other good GPS nav options for the Touch, including the TomTom and Magellan Car Kits and associated apps. Found a good overview/review of options at: http://gps.about.com/od/mobilephonegps/a/iPod-Touch-GPS.htm