Is this bad?

I'd say it's possible, but not likely. More likely if you sleep on your side though, your shoulder and hip are disbursing body weight on a smaller surface area, so more chance to break. Also if it would fall onto a hard floor or side of the bed, well you can imagine. I would suggest getting a thick silicone case, headphone extension, and leaving it on a nightstand. That's what I do, often wake up with buds wrapped around my neck, but ipod is still safe.

 

No worries! If you buy a posture-matic matress, your weight is evenly spread out over the entire surface! This protects your iPod from harmful preassure points, that could damage, or ruin it. Act now!

But seriously, as the poster above me said, its pretty possible for an elboy, or hip, or shoulder to break the screen. I'd keep off the iPod if you risk sleeping on it... however, I have been know to fall asleep watching a movie. Lucky I woke up at the next loud part, saving my iPod.

 

I've done it for a year now, it'll be fine.

 

Sorry but this thread makes me giggle.
And FWIW no, you cannot suffocate the iPod Touch though depending on who you are maybe that's one lucky iPod!!