The cheapest iPod touch now has 32GB storage. The cheapest iPad mini has 16GB. In my country Sweden, they are similarly priced. iPod touch for 2895 SEK and iPad mini at 2990 SEK. I suspect that will be a serious disadvantage for the iPod touch, which means a lot less iPods are going to be sold.
I guess Apple has thought of this and done their utmost to make the iPod touch as attractive as possible. They have introduced more colors, doubled the storage, iPhone 5's screen and most of iPhone5's apps except for Siri (the intelligent assistant).
But then there's the size. I look at the two products and I see that they can both do the same things, but the iPad mini has a larger screen. Never mind that it's not Retina quality. It's bigger! It reads more easily than the mere 4 inch screen on iPod touch. The movies are bigger. The sites are bigger. You name it and it's bigger.
Ok, they're made for different activities and different groups of people and there will always be many who prefer small to big, because for them portability is top priority. The larger storage is attractive too for music and movies.
I still think the price difference will have to increase. The iPad mini can't go up in price, because that would drive buyers away from it, to competitors or to the larger version. Hence I think the solution is to lower the price of iPod touch. I believe it's going to start edging down within six months.