I have a 64GB 3G and I would definitely not go below 32GB as you just seem to be able to chew up space without thinking about it. The 3G can upgrade to iOS 4.x which is important as that supports multitasking and is the future of iOS applications. The older 2 is single tasking and will not be upgrading. Some applications are already available only for iOS 4 and up which will become more common.
Honestly, I had zero interest in Apple, iPhone, iOS, etc. until I received my iPod Touch as a gift for my birthday in June. I have had an old iPod Photo since 2007 that was given to me by some acquaintances because the battery was bad and they were going throw it away. However, I was not "into" Apple even after repairing it and using it. For email, web, etc. I used a desktop at home and laptop on the road. However, once I got a look at the free iPod/iPhone applications available as well as the the ability to link my iPod's mail application to GMail and it's calender to GMail Calendar, I got hooked. I have both my personal and business email accounts linked in and when I traveled to Canada this summer, I found WiFi at most of the rest stops I went to and was able to check my email and weather conditions along the way. Now I would find it odd to not have it in my pocket. I still have no interest in the iPhone as that requires signing a contract with AT&T. In some ways, the iPod paradigm is the future of mobile computing. The idea that voice is separate from data is going away. I can already make phone calls from my iPod Touch using Skype to a real phone number. Eventually, Google Voice will get approved by Apple and I will be able to make and receive phone calls using that application, needing only a WiFi connection.