Cowon J3:
FLAC support, wide file format support
Tactile controls for FFWD, RW, play/pause as well as volume up/down
Beautiful AMOLED screen
Drag and drop or synchronise with any media player software
Versatile user-definable parametric EQ as well as mind-blowing BBE sound enhancement technology; Jet Effect 3.0 & BBE+, 39 presets and four user-definable presets
High-quality Wolfson DAC
Powerful, high-quality headphone amplifier in headphone out
Drag and drop Xvid/DivX compatibility, wide video format support; videos look stunning on the AMOLED screen
Lightweight build
Almost completely unscratchable Corning Gorilla Glass screen; a screen protector may still be needed as most notably quartzite (sand) is harder than the hardened steel knives used in some of the demonstration videos
Expandable with microSD-cards up to 32 GB, or possibly higher
Entirely customisable user interface with three different menu styles
Comes in two colours and three sizes (8 GB, 16 GB and 32 GB)
Narrow picture format support
Extremely long battery life (64 hours music playback)
Can record from microphone, radio and line-in at various bitrates
Built-in speaker
Composite/HDMI video out
Made in South Korea
Something a bit special
Ipod Touch:
No FLAC support
No tactile controls
Pretty crappy TFT screen, albeit with a higher resolution
Completely tethered to Itunes, no drag and drop; all synchronisation and file-transfer must be mediated by proprietary software or software with specific, in-built Ipod support
A few subpar EQ presets, partly resolved by third-party equaliser apps; no corresponding sound-enhancement technology as far as I know
No ****ing idea
Something a fair bit worse, from what I can hear
No idea
Heavy build with extremely easy-to-scratch chrome backside; feels sturdier in the hand, but full-body protection is necessary
Regular glass screen; screen protector is mandatory
User interface not customisable
No microSD expansion
Not customisable
Comes in four sizes (8 GB, 16 GB, 32 GB and 64 GB)
Wider picture format support
Considerably worse battery, haven't bothered to measure though
Can record from microphone
No built-in speaker
No video out
Made in China
Everyone has one
Both have gapless playback, both support losless audio codecs (FLAC vs the Apple ALAC crap) and both have capacitive glass touchscreens. There is a reason that I didn't mention applications and Wi-Fi as a 'pro' for the Ipod Touch. This is only and ONLY a comparison between their capabilities as media players, and as such the Cowon wins hands down. If what you really want is a portable entertainment machine, why consider the J3 in the first place? It's there to play music and use it's unrivalled AMOLED touchscreen for beautiful pictures and videos, not applications or web browsing. Arguably the build quality of the Ipod Touch is better, as well as the screen resolution if that is important for you (although 480x272 for a screen of the J3's size feels pretty optimal). Both have proprietary USB cables, and yet everyone seems to have a problem with that.
The point is, there is absolutely no comparison. Where I live it is impossible to get the J3 32 GB for under $300 dollars. I bought it for a fair bit more than that and it was worth every penny.