I'm very neutral on which one I think is better.
I used to own a 5.5g 80gb iPod w/ video and it was great. I filled it with movies and a lot of songs from various music collection I owned, and as well as ones that my relatives had. It was great to have since I could listen to tons of songs throughout the day and know I always had a variety of music at my disposal. It was great for long trips too.
I currently have a 16gb iPod touch 2g and use it for surfing the web, using social apps, playing games, and watching videos on its wide screen ratio. The iPod touch is very versatile which makes it great to have. Knowing that the iPod touch now comes in 32gb and 64gb, it's great to know that you can have a great product that plays music (and can store a lot of it too), as well as having a pocket computer-like product, and a little gaming console too. More than just that, the App Store has some great apps for music such as AOL Radio, and, my favorite, Pandora Radio.
You can always purchase an iPod classic for the experience of just music, a few extra features, and physical buttons (which helps a lot when you want to switch songs while your iPod is in your pocket).
But to really give you a recommendation, even though you already are considering moreover the iPod classic, I recommend that you purchase a new iPod touch.
With the new price tags (cheaper 32gb) and a new 64gb at a good price, you can get the best out of a music experience with all the storage, Genius playlists, Genius mixes, other standard iPod music features, and as well as the App store that has a variety of music apps such as AOL Radio, Pandora Radio, iMeem, and many more. Also, you can stream music straight off the internet too via Safari, or listen to attached audio files from your email.
With the iPod touch, you can have a great music experience, and totally make what you want of the iPod touch with all the great apps that are available at the App Store.
Hope this helps in making your purchase. =)