The new Nano is truly nano. Great evolution. So many people use them commuting and working out/running. The clip is essential to this. Also a great improvement. No armbands, etc.
The older Nano tried to make the screen bigger and incorporate video, etc. So much of what the iPod Touch really does better. As well as the Touches gaming and other App Store appeal, the older Nano was lost between trying to do to much on a smaller screen and being small and functional.
The Classic is just what it says. Keeps the clickwheel, gives those that want video watching, clickwheel, and other 'classic' iPod features there. The Touch does not eliminate the need for the Classic because for some people it is just about music and storage capacity. And the Classic takes as much music and video with them as possible. It's a 160GB, that's more than some notebook hard drives! No other iPod comes close.
The new Nano is the perfect workout, ride the train, handsfree music player and that is what Apple's biggest market is in iPods. I rode the train last week and so many people were holding Nanos in their hands listening to music. This time next year, they'll all be clipped on, keeping their hands free to hold coffee or books or whatever.