I would say I would rather an even higher capacity iPod Touch (and iPhone) than an iPod Nano with a higher capacity. Many people are going for the touch over the nano.
I like the iPhone / touch and the nano for different purposes. I love having the nano with a bunch of video news podcasts and TV shows on it, I kind of half-watch them in the kitchen in an Altec Lansing speakerset while I'm cooking.
The larger screen of the phone / touch I like for watching movies and for coverflow on music, plus net browsing.
But would I get a 32Gb nano? Sure. All those CSI Miami shows with the hot bright colors are my favorites during our freezing winters, and I could fit more seasons on there. I almost treat those shows like random tracks of music, doesn't matter which one or where it left off... just show me the colors of Miami in January in my chilly kitchen at 7am.
But if you offered me a 64Gb touch or a 32Gb nano, I'd probably go for the touch first, even though the 32Gb ipod touch is pretty spacious. I can usually slam new purchases onto it without offloading any stuff, which process does slow me down when I refresh my (8Gb) iPhone... have to think about what I'm willing to part with before I can load new tracks onto the phone.
So imagine a 64Gb iPod touch... I think the reason i'd like that over a larger nano is that I could store more choices of longer video formats. I don't really like watching regular movies on a nano, and everyone has favorite movies they could watch for a tenth time, right? Nice to be able to stash more of those on the iPod touch with its bigger screen. Right now I have 10 movies, a season of TV shows and about 500 tracks of music on the 32Gb touch, and it has about 9Gb free. I like to leave 5Gb for adding more music but that does not leave much room for adding newly acquired favorite movies without ditching something.
I wanted to watch War Games again the other night but was too lazy to go fish it off an external drive and I didn't want to watch it on a 5th gen iPod that does have it on there right now. So probably I would not watch that movie on a 3G nano even if I had room for it. I'd rather have it sitting on an iPod touch even if I only watch it twice a year.
For just listening to music, without emphasis on artwork or videos, my favorite form factor is still the 2nd generation nano. I think of it as a shuffle with a screen and will never forget waiting for mine to wing its way here from China when they first rolled out.
I still like the 1st and 2nd gen nano small storage capacities too, a bunch of them remain my quick-fixes du jour. Grab one and wipe it down and drag some stuff on it and see how it goes, tweak it a little next time or just do it all over in five minutes. Once you get past 4Gb then reloading an iPod gets to be a project, right? An opportunity but sometimes a burden. So I hope Apple never completely shuts out the smaller size iPods, storage wise AND form-factor wise. Sometimes, less really is more.