I've owned my first gen iPod touch (8GB) for just over a year now and, aside from some minor chipping to some areas of the grey trim, it's still a device I just love the look of.
The main advantage of the second generation iPod touch, aside from the volume controls and speaker, is that it looks like an iPhone 3G face on thanks to the new chrome trim which is extended round from the chrome back.
When you hold the second generation touch in your hand it feels "better" and the front feels "flatter" because the trim around the edge is not angled away from the screen like on the first generation touch.
I have no need for an iPhone, even though as an Apple "fan" I would love one but I don't "do" mobile phones, so the touch offers me the best part of the iPhone (the touch screen iPod) for a fraction of the price.
However, at just £165 for the 8GB I could be tempted to upgrade soon for aesthetic reasons alone, which as vain as it sounds, it's just how I am.
Besides, my wife has been annoying me by asking "What will you do with that iPod when you get a new one".
I just wish Apple would do away with the chrome backing on the iPod range because it gets scratched up far too easily, whether you simply shove it in your pocket day after day, or slide it in and out of a carry case. If I do upgrade to a second generation touch, I could be tempted to go for the invisible shield or a two-piece full front and back protector ... although all the back protectors I used on my own first generation touch only covered a fraction of the back, leaving areas open to scratching.
Anyway, in a nutshell ... if you're happy with a) the performance and b) the condition of your first generation iPod touch then stick with it. If you like the new iPhone identical look and want device mounted volume controls, go and upgrade.
