My 8 yo has been asking for an ipod for Christmas for several months now (so at leaat is consistent). He is now asking for an itouch, which seems to be another £60 or so. He doesn't have a DS or similar, though he does use his brother's one occasionally.
The itouch looks as if it will combine games/music/video fairly well. However I've never considered spending so much on something so small for him. I suspect that I would be more annoyed if he breaks/loses something worth £160 than if it was worth £100. That said I would also like him to get use out of it, so having it as a possible gaming machine is useful. I haven't yet worked out whether the desire for the itouch is primarily playground posing (not that it will ever go near the playground!).