I bought the 5th gen iPod hoping to get a decent always-with-me camera. Not the case. It's the worst camera I've ever owned. It's difficult to hold, has extremely long shutter lag, is very noisy in low light, lens doesn't zoom, and doesn't support memory cards.
I don't know what iPod Touch you were using before dude but non ever supported memory cards so your case on this is irrelevant.