We got our daughter a refurbished Ipod touch through the Apple store. I can't recall how much we paid, but it was probably excessive.
She just turned 2 - I'm sure some folks heads are exploding after reading that. We were intending to get her one of the kid oriented tablets since she loves to play with our Iphones, but after talking with one of our even nerdier friends who is very into mobile devices we decided one the Ipod for a few reasons. The UI is dead simple (even before our daughter was 2 she pretty much had it mastered), there are tons of learning apps available (our daughter has lots of flash card and puzzle apps - not all free but many are), it can share chargers with our Iphones, and it's damn near indestructible inside an Otterbox case.
That said, I have a earlier model Google Nexus 7 (I understand they have recently released a new one?) and it's been awesome so far and I believe they can be purchased for around $100.00 a piece. It has a much bigger screen, but it is still portable. This is probably what I would steer towards. It's certainly more capable than an Ipod touch. I can't speak to the texting capability of any of them, other than I believe the Google voice app will permit texting over wifi and should be available for either device.