The iPod touch does not make a good ebook read for anything more then quick reference or a short read. I have 10 - 15 books on mine and honestly while nice at first it is just to small. I have "borrowed" my wife's kindle on occasion as I can tolerate reading it longer from just the size alone. I picked up an Archos 5IT, and while better for reading books then my touch it is still a hare on the small side and the backlit screen is still not as easy on the eyes. IMO 7-10" is really the sweet spot for a good reader.
Everyone that I know who owns a kindle/nook/sony e reader loves them, but they are all hardcore readers that devour book after book. The don't buy books a head either, there is no reason. Finish a book while on the pot, download a new one, in the car on a trip, download a new one, at work, download a new one, etc etc. Even after the iPad launches I still feel the heavy readers device of choice will be a kindle like device, the people that swing toward the iPad will be those that don't read enough to justify having a kindle, but enough to want an ereader that does more.