I have a Touch and do lots of reading on it. The Stanza app can convert most any kind of file to the format it reads. At any time I have 4-5 novels on mine. Reading and my book database for used bookstore shopping are my two big reasons for having it. The music, photos and pda stuff is secondary to me.
With any computer purchase the big question is what are you going to use it for. Than see which machine supports that. If reading is big on your list the Touch is good for me and I assume the iPad would be better with the larger screen.
Besides the Stanza app it has a Kindle app, and a B&N app that lets you buy and read books for those stores. The apps are free, the books are mostly pay but they all have a reasonable number of free ones.
