OK I figured it out. For the benefit of anyone else who has the same question heres the answer.
OpenSSH does not appear on your spring board. In order to get into your iPod you can either SSH or SFTP root@ipaddress (of your touch). You'll then be prompted for the password which is alpine.
I've heard people say you can switch off SSH with OpenSSH but I haven't found out how to do that yet.