An iPod is a great tool for photography, whatever anyone says. It's more restricted than a DSLR, sure, but for those moments when you see a photographic opportunity and don't have your DSLR with you you'll be happy you had an iPod.
Just remember the price, and compare that against the alternatives. Personally I'm selling all my DSLR gear and moving over to an olympus e-m10. It's small enough that I'll be taking it with me a lot more. However, the apps you can get on the iPod allow you to process your photos immediately, which is a big plus.
Just to show you that it's the person behind the camera, and not the camera itself, that matters, check out the iPhone photography awards and be inspired
http://www.ippawards.com/
Alex