The max icons can be is at 60x60 (your iPod will shrink them down to this size). It's always best to keep this in mind, you might as well save them to 60x60. If you are making them at 2000x2000 or something (somebody did this with a glass theme), you have to remember that you are only going to see ~3% of each dimension... so don't even bother. Just use something simple, like 120x120, that you can just take a quarter of to get to the desired lengths.
I wasn't making fun of your theme, I just remembered your icons being ridiculously huge. As in taking up two screens on my iPod.Hehe "GLASS THEME". That would be ME!
Anyways... No the touch doesn't resize the icons for you. I tested this out when I was creating icons, I tried 80x80 and the problem was that the icon was going under the text and it just didn't look right, 70x70 was better, but not good enough. I would say either one of these next three sizes is the best: 59x59, 59x60, or mine in 60x60.
You can make the icons 100x100 if you want, it's only gonna look crappy. I dunno if you can really go that big, but I did do 80x80 and I noticed problems. I wouldn't go bigger than 65x65 max...