I haven't owned many iPods or other MP3 players to compare it to, but I have never noticed much lacking in the 2nd generation iPod touch!
The sound quality is great. The touch screen is fun and easy to use, and I never have any trouble finding the song, album, or artist that I'm looking for.
The external speakers aren't very loud, but I'm still glad to have them.
I haven't used it much for games or apps, but when I have it's worked well.
The wifi access ability was the main reason I decided to buy this iPod instead of a different version. It's a great to be able to check my e-mail and such when I'm at a cafe or at the library. Typing on the little touch screen keyboard isn't ideal, and can be a slow process due to the size, but it works and is a useful feature to have.
As for battery life, I've found it to be very very good. I've gone for days without needing to charge it when I use it only to listen to music. If I use it for internet access or games it usually lasts about 2 to 3 hours.
The main thing (maybe the only thing) that I don't really like about the iPod touch is that you can't put things onto it without downloading the iTunes media player. I think it would be nice if it could be used with any media player.
Other then that, I think it's a great iPod.