If you're willing to have no music on the road, or sync only a few songs is not for me to judge, but 16Gb at $299 is a decent price. It's pretty much been the same since the 2nd generation. Over the last few years, it does not appear that the price has been adjusted for inflation, so I'd say it is fine.
I have Spotify on my iPod Touch, and that does take up considerable space, about 600-700mb worth of music at 320kbps. 8Gb just wouldn't really be feasible. You'll have approx 7.6Gb of free space after installing iOS, then about 1Gb of music (if you don't listen to your whole iTunes collection), another 1-2Gb of movies that you rent or buy, then the games and apps which take another 2Gb. Furthermore, with the new iPod Touches with the 5Mp camera, that'll increase the size of photos. That will fill the Touch to the brim, and leave no space for anything else.
16Gb really is the minimum, and considering that Apple hasn't really adjusted for inflation, it seems that they really haven't increased the price 'so much'