ianwuk, iTunes has a feature to convert songs to 128kbps AAC when syncing them to an iPod. I never bothered to use it with my Classic since it had more than enough space for my higher bitrate (mostly 320kbps MP3) music but with my shuffle and nano, I can fit much more music. There is a slight decrease in sound quality but it's negligible when running and easily worth the benefit of more music with you.
For example, on my 2GB shuffle, I have 417 songs with voiceover enabled and still have 248MB free space, before enabling the 'convert to..' feature, I had about 190-200 songs.
Also, if you're worried about sweat killing another iPod, get a small bowl or bag of rice or silica gel and get in the habit of leaving your iPod in it after running. It will help absorb moisture and sweat.