All prices are in nz dollars, 1 of which is about 70c american.
psp + 8gb memory stick = about $580, maybe a bit cheaper if you can find a good deal for either.
ipod touch 16gb =$630, again possibly could find a better price.
So how much music do you want? Ipods are slightly better set up for playing music, because they allow playlists, and keep you music organized by band and album while still allowing you to play all of it on shuffle, psp cant do stuff like that(group mode keeps playing the current group until its all played). I put all my music in one folder on my psp, since i always use random, but its a pain to find a particular song.
Psp on the other hand is a fair bit cheaper and still gets a decent amount of music, also you dont have to deal with the pain in the ass that is itunes, its all just drag and drop stuff for music, movies, and photos. And of course, it can play ps2 quality games (well it will eventually, its pretty close currently).
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