Toribash
The sound quality on an ipod touch (as is with most ipods) is pretty appalling.
:D
Why are you talking about the iPhone? I already have a perfectly good phone, I don't need nor do I want another. I want a music/movie/maybe game player. I checked out the Cowon S9 and it really fits what I'm looking for perfectly, so thanks DarkJak.
Protips: buy a sansa clip + (iirc they go for $100 in australia because electronics stoers hate us, but you should be able to import for ~50 AUD), buy an SD card for more storage, buy an expensive set of headphones/canalphones

Difference in soundquality between DAPs is going to be ludicrously small compared to a quality set of headphones. I'd also be happy to say that the clip performs better than a large number of more expensive products, and that the clips shortcomings (channel separation, THD) are irrelevant if you are listening to music on the go.

This thread shows the clip and how it performs compared to an (imo subpar) $800 DAP (it also contains RMAA info for some apple products iirc)

There was a blind test held in another thread, during which many failed to tell the difference between all four. I was able to tell the Hifiman hm801 and the cowon because of rolled off high frequencies and rolled off bass respectively. Telling the difference between a clip+ and the original file was harder. I was able to tell the difference only with a quality set of headphones (I don't have any good speakers atm).

If sound quality is your only concern, I wouldn't hesitate twice to buy this.

If you have trouble understanding some of the measurements, I can help.

I suggest www.headphones.com.au to buy headphones in australia or head-direct.com to import (IMO you should buy local).

If you want a slightly bassy sound, I'd go for a Vsonic RO2Pro2. If you want a neutral (but low impact bass) and detailed sound, I'd go the RE0.

This should cost you as much as the other media players you were considering (~150 for the clip + SD card and ~70 for the phones), and would have no problem saying that this would sound more than twice as good.

If you want bells and whistles features, get a Sansa Fuze. It's audio components are identical to the sansa clip, but I think value for money is the best course of action with digital audio players.

If you want stuff that goes beyond music, can't help you.