Slightly off-topic… But for the sake of winning a future mini vMac user:

Will I still be able to use App store with a jailbroken touch?

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Sure. You won't loose any functionality, only win a lot more!

Are there any "bad side effects" that occur? (will it affect any Apps I already downloaded?)

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No.

To "un-jailbreak" the ipod is it just a case of zapping it with iTunes?

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Yes.

And finally....are there any "must have" apps that I can only get with jailbreak? (is it really worth it???)

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Well… mini vMac for example! A complete Mac Plus in your pocket, sure it's worth it!

I myself use only two others apps: Cycorder (video recording) and PDAnet (iPhone as modem to surf anywhere with the laptop).

Edit: usual disclaimer… I can't be held responible, etc, etc. It worked great for me, as I used the official QuickPwn utility from the iPhone Dev-Team, followed all of their instructions and backed up my data first!