I am confused as to why something as small and low power as the Apple Watch, needs a POWERHOUSE of another iOS device to keep the watch running?
The paired iOS device needs to run the "watch settings" app to communicate with the watch, load apps (and possibly music and photos) onto the watch, etc.
I think focusfocus is speculating that only the latest iOS will have these watch control functions, and the iPod touch with the A5 chip is not powerful enough (that is, the chip isn't advanced enough) to run the latest iOS.
Come to think of it, the iOS device also needs the latest Bluetooth protocol to communicate with the watch. Can't remember if the iPod touch has that or not.