Right, as psychic stalker says you could still use Wi-Fi on your smartphone and not run up your data bill.
As for iTunes... I don't use it so I can't really say. But I think you'd still be better off trading in the iPod Touch for a smaller, simpler iPod. You're basically carrying around a device that is just as big as a phone, and has all the same features as a phone, except for the actual phone part. So you're also carrying around a phone. That just seems redundant.
I'm not sure what it is that people "love" so much about iTunes, but I seem to recall that it works just fine with 3rd party mp3 players. Even if that's not the case, have you actually tried other music managers out there?
Here are a few free alternatives (in no particular order):
http://getnightingale.com/
http://www.mediamonkey.com/
http://amarok.kde.org/
http://www.tomahawk-player.org/
http://www.doubletwist.com/