I have an iPhone which is the same size as the iTouch. I use it for Amazon books and for occassional web. It is really not great for accessing the web--screen is much much too small. It works for me in a pinch.

I use a Sony reader which is smaller than the Kindle. I really like it a lot. Mine doesn't have web access though. It is different than reading on the iPhone--a bit easier on the eyes, but it's not back lit so you can't read in the dark as you can with the iPhone.