I think generally, the biggest issue with the iPod Touch is the screen size. I have both an iPod Touch and a Ectaco Jetbook. Each have their strengths and weakness.
The iPod's biggest strength as far as I am concerned is the fact that Stanza and eReader are both available (as well as a couple of other ereader apps). If you load Stanza on both your desktop (Windows or Mac) and your iPod, you can pretty much take books in any major format and it will translate them into simplified ePub versions that the iPod version of Stanza uses. Thus, pretty much any non-DRM'd book you can find will be readable with Stanza. If you want a DRM'd book, the eReader software will allow you to read that (and we keep hearing that mobipocket will be available in the near future). Thus, compared to many dedicated readers it is more flexible.
The biggest disadvantage is the screen size. Now mind you it is perfectly readable, but I would estimate that at a reasonable text size, the iPod Touch holds maybe a 1/4 of what you would get in a printed mass market paperback. That being said, page turns are fast... but still you will be doing a lot of page turns to finish a book.
Personally, I never found the finger print issue to be a big one; but hey, each person has their own set of things that will annoy them
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While I don't the device is perfect, the Jetbook I am currently using I think is a nice balance between the size of the 6" eInk devices and the PDA sized devices. It won't fit in my shirt pocket, but it will fit in my jean pockets and my jacket pockets making it easy to bring with me. The screen is very readable and battery life is useful. The only problem is very limited format support (which I admit is a major one) which means that most books will have to be converted into PDF's or plain txt files to read (or fb2; but that has its own challenges). That being said, they are looking to support ePub and mobipocket early next year.
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Bill