before i got a my ipod touch I chose between that, the ipod, an Eepc and the psp. The Eepc could not fit in my pocket so out. Apparently their about the same, it's just that the psp is concentrated on speed, because it has to deal with high quality graphics every nanosecond. iPod touch however, is cocentrated on music (duh, that's why it's an iPod) the speed is great for simple games like pacman or ifish, but for games like asphalt, it sometimes lags. I chose the ipod touch because I needed an exchange from my PDA (hp 3715) and I'd prefer the size since that it'd be easier to bring anywhere and the sound quality, wow.
PSP: Mainly for games
iPod touch: mainly for Media(music, movies, photos)
One more thing, if your gonna get a touch, get the first gen. Weird thing to say right? Yes, but apparantly even if the 2nd is faster and tougher than the other three (iPhone, iTouch 1, iPhone 3G) due to some reaserch by me, the iPhone dev' team hasn't made a jailbreak for 2nd Gen, "beacuse it's not an iPhone" they said.
Another thing, most itouch/iphone games are free, good ones cost about $5, awesome ones cost $20. PSP games all cost $30 (UMD).
My final say, if you want a small device for mini games, get the touch. Since you already have an iPod get the PSP, easier controls since that it has more buttons and a more enhanced gaming experience. Don't say "wait for another console" because if anyone has noticed, everything gets an upgrade in a few months time, PSP->PSP 3000, DS -> DS Lite, iPhone -> iPhone 3G, 1st gen -> 2nd gen iTouch.
Maybe wait for the ipod touch 5th gen, it should have bluetooth, GPS, a built in Camera, a built in mic and better speakers.
For some of you who don't know, the ipod touch has bluetooth and an fm transmitter, they both have no use (now). See
here and
here.