The iPhone is defenatly a better choice. I'm using the web browser on my iPhone 4 right now to answer this question! The iPhone does EVERYTHING that the iPod does, plus a whole bunch more. Obviously, you can make calls and texts with it. But also every iPhone has mobile web connection. iPods don't. An iPod needs wifi (wireless Internet originating from an immobile source). With the iPhone's mobil web connection, you can download apps and music, Facebook, check email, and browse the web from ANYWHERE!
So what I'm saying is, if you want something basic, go with the iPod. If you want a party in your pocket everywhere you go, get an iPhone! Best purchase I've ever made.