It depends what you want.
Take an iPad for home use entertainment and continue using your iPod for whatever you do (playing music presumably?)
Your iPod shouldn't have an issue playing music. If you want it to do more than that, then maybe you need to get a new iPod.
That's what I would do. Use the iPad for home, and the iPod for on the go (if it can suffice your needs - otherwise I'd upgrade the iPod).
I have a iPod Touch 8GB 3G (basically a renamed version of the same iPod you have) and while it is kinda slow (compared to my 3GS), it still works for the basic stuff (apps, music, video). Mine is pretty new so the battery lasts a long time. I'm not sure how well your battery works now since its been a while since you've got yours.