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Originally Posted by momtodogs
What format does the iPod use?
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Depends on the app you're using to read from. Since your books are already ePub's you can use iBooks or an app like Marvin to read them without converting.
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Does the iPod allow use of a micro SD card?
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No
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I use Calibre for managing my book collection. 
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Not sure if Calibre (or more accurately the iOS plugin) is working with newer versions of iOS, but you should be able to add books with iTunes (drag them to your reading app in iTunes) if nothing else.
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Is what I am thinking of doing, even possible?
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Sure, I don't see why not as long as you're okay with the screen size for reading.