I went with 32 over 16 as I was running close to 13GB on music files alone, add in a few music videos that I already had and my copy of Blue Harvest, all the pics I will add to carry around and apps that I download.....
Given the doublind of the memory is only US$100 and that makes it a 33% price jump for an extra 200% of the memory the cost to size ratio is pretty good on the 32.
If the price is an issue, you can always limit the amount of things that get synched so you dont have to worry so much.
I did resize my photos to a smaller file size so I can carry more, I have a few thousand pics almost all taken with a Canon 30D or 40D so the standard file size is easily 2.5MB, new size is around 400-500kb, and I just took another 1200 in Seattle last week 🙂.
Always try to buy something you can grow into, especially when going from a standard iPod to a touch where apps etc come into play. My only other iPod is a 4th gen and that means I was going from music only to everything possible when i upgraded.