Just thought I would chime in on this... I got a Touch, used it for a few days but, it had the negative black effect so I traded it back in and spent the extra $ to get the iPhone. Activated and disabled phone service so they are effectively the same device now. For the money - the Touch is a great player IMO but, the extra $ does get you considerably more on an iPhone even if you never use the phone functionality. Camera, microphone, speaker, bluetooth to name a few... Regardless,depending on your needs either device should fit nicely.
I compared it directly to my PSP as a media player and I felt that both the Touch and the iPhone were better sounding on the same MP3 file (using the same headphones). The screen, although smaller, was much "clearer" for video playback and color reproduction seemed better to me as well let alone taking into account the PSP's limited viewing angle. I was also able to comapre it directly to a friend's Archos (only for a limited time though) and although the Archos was the better video player IMO (the great screen and higher resolution video support) the Touch and iPhone were still better in audio.
With regards to the other features such as Internet browsing, user interface, size/form factor, battery life, storage capacity, etc there isn't much of a contest here. The Archos beats the Touch or iPhone in capacity (obviously) and (depending on usage) battery life. The PSP obviously would win for game support against any of these others devices but, would loose against any of them on capacity, battery life and all the other functions. However, for Internet, user interface and size/form factor the Touch/iPhone wins hands down.
And to be fair - capacity and all the other differences aside - the user interface (multi-touch) is such a revelation IMO that it outweighs many of the other factors (it did for me at least). Coverflow works and is beautiful on that screen, the tap-on video playback controls and pinch to zoom ability and a hundred other things are just unbelievably good.
Thanks to all...
Also, for memnoch2 - I wanted to add that the on-screen keyboard does indeed flip between landscape and portrait mode depending on the screen you're on. It is very similiar to the iPhone in that some apps only allow it in portrait mode but, Internet and most others allow you to flip between the 2 orientations as long as you "flip" before opening the keyboard itself. As to the landscape mode music playback, it automatically flips to Cover Flow so uses the whole screen but, mainly its just displaying the cover art and playback controls. Its perfect for selecting between songs/albums but won't help if you want to move the playhead or anything like that.