I've got a first-gen Nano which is in desparate need of an upgrade.
Funny story.. I actually accidentally ran it through the wash in my jean pocket, and I thought it was done. Two weeks later, I decided to fire it back up again, and bingo, it worked. Perfectly.
But as time went on the battery life got really crappy and now the battery bar doesn't even work.
After shopping around, I'd personally would want to get a new video-capable iPod, but I'm going to wait until this one is a little more dysfunctional.

For my current usage, I can still go a good 3-4 days before it's dead and it still plays my music/podcasts fine.
I picked entirely around what I want to do with it.. I love the extra space, since my Nano doubles as a portable storage drive for me. I keep essential stuff like a firewall, antivirus, spyware remover, and etc on it so if I'm at someones place and they need one of those, I can just copy + paste it onto their My Docs and they're good to go. The bigger drive means more files, more songs, more pictures, and more video.. so that's a big plus since I do plan on buying video for it for boring trips or a long wait of some kind. Plus more music variety is good, because after a few weeks of listening to the same 300ish songs, they tend to get kinda stale.
If you want and are going to use all those extra things the full iPod can do, I'd say invest in that. If you want them, but don't really need video and don't care for the extra room, I'd say get a Nano. Then if you don't want the ability to pick and choose your music, and you just want something that'll play music, I'd say don't even go for a shuffle.... there is cheaper stuff out there that'll do the same thing and in many cases they'll give you Nano-like features.