So it came down to an unfortunate decision....either a larger screen for video and a slick touch interface in the iPod Touch, or a massive amount of storage and longer battery life in the iPod Classic. Seeing how storage and battery were pretty major, I reluctantly decided I'd rather go the classic route since much of the touchscreen's charm is just eyecandy.
But playing with the Classic in the Apple store, I quickly found some of the rumors I had seen around the net seemed to be true despite many people claiming they were false. The Classic (and the nano as well, but it seems more noticable on the classic) is really slow. Everything about the interface was slow. I expected that maybe Coverflow wouldn't be as great as it may seem because it'd be hard to make it run smoothly, but even the standard interface for looking by artist, albums, etc. was sluggish. Doing anything seemed to take longer and lag more than I would expect with an Apple product, especially after being so used to the super-fast response times on older iPods.
Besides, after playing with an iPod Touch at the store as well, the screen on the classic felt miniscule. I guess I'm waiting until they either get much more storage into the iPod Touch (it could be a while...adding a hard drive would only reduce battery life further to something intolerable, and it doesn't look like they'll be able to get some massive flash storage in there real soon either). It is also possible that Apple could release a firmware update that resolves the slowness issue.
In the meantime, I'll be keeping an eye on the new players by Creative. Currently they're not anywhere near the same amount of storage for the same price, but their screens are better and they can play more video formats (so you don't have to do conversions like you do for the iPod).