I think the portability of the touch is more in tune with lifestyle of a kid. Going to the grocery store with mom, sitting in the car, etc. The child can put it in their pocket instead having to carry it around in a case (what 10-year-old walks with a 10" pouch everywhere he goes?). Not to mention the increased liability with something that must be carried by hand; increases the chances of it getting left behind somewhere (this happens to kids AND adults).
As a music player again, it makes more sense to have something small and portable instead of an iPad. It comes with earbuds which are nice. When I was a kid, I loved making movies and the iPod touch can record movies really well. Of course, this can also be done with an iPad but the portability is what I am getting at here.
Perhaps when he gets older, the iPad will make sense.
P.S. Make sure you engrave his name on it (for security purposes, unless you plan on selling it).