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I can easily go with both side of the argument here.
But in general, iPod Touch is for multimedia (Music + Videos) and accelerometer gaming.
The Axim is for business (Notes, calendar, etc..), navigation (with a receiver), and regular gaming.
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The fixed storage in the iPod series also annoys me. SDHC is used for expansion (I think up to 32GB now). If can be removed and swapped. With an iPod, once you are out of storage, you are out.
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The iPod Touch (2nd Gen)'s processor is only 532mHz. It is not sufficient compared to the 624mHz (Possible higher with overclocking of the xscale processor). So by raw processing power, Axim beats the iPod touch. I would assume games would run smoother (FPS is based on processing and graphics).
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As of the OS, both Windows Mobile and iPod Touch's icon system have their pros and cons. On top of my head, the icon system allows one program to icon. The WinMo OS allows a categorized menu, which I find a bit easier to use compared to the incessant scrolling to find the icons.
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Currently running LennySh L11 ROM on my x51v.
Currently running LennySh A09 ROM on my x50v.
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