I have had both a classic (well, a few classics) and an iPod Touch with 64GB, and currently use both.
The classic has the old style HDD, and it was a somewhat unfortunate fact that HDD failure occurred in a small, but recurring number of them. For my part, I had two HDD failures with iPod classics at different times. Each of them were still under warranty when the HDD failed, and both of them were replaced more-or-less immediately, without fuss, or problems or recourse to ludicrous sub-clauses when I presented the sales receipt along with the faulty device.
This excellent customer service and honouring of warranties was one of the main reasons I switched to Apple computers. Perhaps I ought to add that the classics which died on me were all the 30GB versions (not quite sure which generation that was). The ones I have bought since then, namely the 80GB, and 160 GB versions have worked flawlessly.
The big advantage of the classic is the capacity of the storage; for those of us with a large music library, who love music, and wish to have our entire library on one portable device, nothing beats the classic, which is why I always have at least two of them simultaneously.
However, the iTouch is a lovely device and is capable of much more than the classic; (I don't use it for much other than music, but it will readily lend itself to an awful lot else). The SSD is a lot faster, and a lot more stable than that of the classic. Indeed, its only limitation is that (for me, at least,) 64 GB (the maximum size currently available) is no longer sufficient to play host to my entire iTunes music library. If an iTouch were to be made available with 128 SSD, I'd buy it in a heart-beat.