Hmm, I'm not familiar with any devices bigger than 32GB+flash card or the iPod Touch 64GB. Now, Flash-expandable players can (some of them, anyway, that use the full-size SD cards) go past a 32GB card, but it starts to get a little more expensive. That said, a 32GB J3 with a 32GB flash card (no 64GB options yet for the micro-SD, as far as I'm aware) costs much less than a 64GB iPod Touch.
Now, though I love ragging on Apple products more than most, the iPod Touch is perfectly fine when it comes to music quality. And, because it's an Apple product... well, you have oodles of LOD options, and can therefore amp it easily. If you also need access to the app store and the other features like an internet browser, then you also have those.
In the J3's corner, you can get the same or more storage for less or an equivalent dollar amount. You can use FLAC files. And JetEffect is a hell of a tool. I don't know that you can amp it as easily or as well (and so you may be limited in choice of headphones that the player can drive). As far as I know, there is no LOD made for it (you can, however, use a 3.5 to 3.5mm line to amp it, though you may have to do so with Jet Effects off). Accessories are also far more limited and much harder to get ahold of outside of South Korea or the various international online dealers like Export Prive. That said, the ability to run most conventional headphones, the ability to play FLAC, the ability to use Jet Effects to custom tailor the sound a little bit... Well, I went to one from an iPod Touch, and sound-wise, I think I made the right decision (note, the J3 does sound pretty unimpressive right out of the box, and I initially thought I'd made a mistake... but after fooling around with Jet Effects, I'm much much happier with my decision).
If you're looking outside of the J3, there are a couple of boutique players like the Colorfly or the HiFiMan offerings that might be able to challenge it. I've not really had a chance to look over them, as neither of them appeal to me, nor have I listened to them. Someone else can probably better speak to their quality and sound image.
As for the SD card... I only use a 16GB, but I haven't noticed any slowdown. And no, it doesn't stick out (it's covered by the bottom panel).