I just went through a similar decision and decided to go with the Netbook which I am using right now to type this message.
I bought a Dell Mini 9 and am running OS X on it which works perfectly.
You can get the same computer, but made as a Vostro right now for $199 with an 8GB SSD and 512MB of RAM (buy yourself a 2GB DIMM for less than the 1GB upgrade from Dell). it also has a built-in memory card slot so you can buy a 32GB SDHC card for additional storage.
Much of my decision was based on the fact that the iPhone 3.0 software will allow Bluetooth tethering for data transmission. That way, I can tether to the phone with the netbook and browse at 3G speeds on a full function browser (I'm using Firefox right now). Then, if I am in an place that offers Wi-Fi, I can connect with the netbook and browse just as I would if I had the iPod Touch. Yes, the netbook is bigger than an iPod touch but it is still very portable.
Another factor is the size of my music library. Even though I have not ripped all my CDs, my MP3 folder is just over 100GB. Using the 160GB Classic that I have now lets me bring my entire ripped collection with me and provides excellent battery life. Having to manage my collection to decide what I want to bring with me on any given day just doesn't interest me.
I like my netbook so much that I bought 2 more, one for each parent. Though I am using OS X, the Dell distro of Ubuntu is so easy to use that anyone can use it to do things like web browsing or checking email. It even has a built-in PDF writer and Open Office comes pre-installed.
EDIT: Link to the Vostro sale: http://configure.us.dell.com/dellsto...top-vostro-a90