What should I be looking for in a used iPod touch?
First thing to look for is whether the unit has suffered water
damage. All Apple devices have two moisture sensors. One in the
headphone jack and the other in the cable connector port. They will
colour pink or red on water contact:





The next thing is the physical condition of the unit. Scratches,
scuffs, or other physical signs of trauma. This one is rather
intuitive, but what people don't often look for is 3rd party repair using shoddy parts. Look for bulges in the seal around the screen or scratches on the screws (which are signs the unit as been opened). A keen eye can find these discrepancies, and if you do, steer clear. Knock off, aftermarket displays (or so-called OEM replacements) don't have the same capacitative capabilities that the original units do. 
Check the battery next, make sure it charges and shows the correct
charge/not charging icon. If the unit responds when a cable is
connected and disconnected, then there likely won't be any damage to
either the internals, the battery, or the connector.


At the end of the day, trust your gut. If it even smells like too good of a deal, walk away. Ideally, it would be great to find a unit that is still under warranty and then extend that warranty with Apple Care. Another avenue would be to look to Apple's website for refurbished products. They all come with the same warranty as all new Apple products. Honestly, this would be the way I would go about it. You will get a "like" new product at anywhere up to a 30% discount. Like this 64 GB iPod Touch.