I have a nano I-pod touch. I down loaded most of my CD's and placed them in different music Playlist. You have the standard set up playlist and playlist titles you can set up. I did this through I-tunes. In one playlist My favorites, I have over 500 songs. Another one has over 2000 songs down loaded. I just heard I can down load free music from the library. I'm going to have to check that out.
As for books My nano I-pod touch lets me down load apps which have amazon, nook and library app (overdrive app). The amazon and library app allows me to get rid of books in archive. Then I can up load the book again if I want. These two are my 2 favorite book apps for me.
My advice, if you plan on buying an i-pod, buy the nano I-pod touch. It's like having a I-phone without the phone. It may cost a little more, but well worth the money. It has music, camera, e-mail, photos, apps from apple, you can down load movies, books, Netflix/hulu app ect. Also get as much memory as you can afford. This little gadget has 90% of the capabilities of my I-pad. Can you tell this is one of my favorite gadgets? LOL