It’s a pretty amazing device. Perhaps a gateway device for the iphone, even, once the desire to do internet away from wifi sets in.
I gave up on screen protectors and use a Belkin grip ergo cover. My 7 y.o. girls play with it quite a bit. The only thing I don’t like about the cover is that it bulks up the device, which is amazingly slim, but that’s life with kids. I have a “video ipod” for the car. The ipod touch is better for video of course, and the video ipod (basically a classic w/80gb hard drive) is better as a straight-up music player, IMO.
iTunes is fine. Up to 5 computers can be authorized to work with the device, but this gets unwieldy when you start wondering where you got something. A nice feature of itunes is homeshare, where computers logged on to the same account can listen to and import songs from each others’ computers.
Overall I love the device, but I found myself not using the music apps as much as I thought I would. Things are either too small, too imprecise, or not intuitive enough. I have bigger music toys in the next room anyway, so that’s probably part of my not using the ipod touch apps so much.
There’s lots of cool silly children apps, like the Jelly Car that one of my daughters loves. Some of the apps are kind of spammy too, which sucks.