Application development ON the iPod Touch?
I don't think there will be any with a compiler, due to iOS and App Store restrictions. The best thing on an iPhone or iPod I think would be a text editor to write code (I use Nebulous and its Dropbox syncing) and an SSH app (I use Prompt) to compile and run the code. Though it might be tough to keep a connection during a commute for SSH.

If you need a computer to SSH to, you could use an Amazon EC2 app to create and use a box on the go. I haven't done that yet, so I don't have a good recommendation, but it's on my list of things to try.

Also, if you have an iPad, Textastic is a fantastic code editor, but it's not available on iPhone or iPod.