The ipod headphones are poo. Dump them and get a decent pair. I have been through 2 pairs of ipod headphones in under 6 months.
If you are worried about scratches, the best advice is to get a protective cover. My ipod mini is really scratched, but Ann has the plastic clip on hers all the time... hardly any scratches
WRT size, how big is your music collection at the moment? It's annoying having an ipod that is smaller than your library because you can guarantee that when you want to listen to a particular song it will be one that you haven't copied to the ipod.