Looks like I'm the only one to vote for the iPod touch! I have 2 kids- turned 8 and 11 a few weeks ago and the itouch is their crack of choice. Both had ds's but when dh got an iPhone last summer they were hooked. The graphics are amazing, the variety of FREE aps is fabulous and the ones they buy are very affordable ($.99 to $2.99). Added to that is the ability to download movies, take pictures and videos and listen to music I think it's a great way to go.
The ds has literally been sitting in a drawer for months while the touch would be played with non- stop if I didn't impose limits (none during the school week and on the weekends only after reading!). Rules are set aside for plane trips.
FWIW peers of the 11 year old only use the itouch but about 1/2 of the 8 year olds use one.