I'm thinking about the same for my 8 y/o daughter for Christmas. I would go for the refurbished as mentioned earlier. $149 is a very good price, with free ship. At squaretrade.com, you can get an extended warranty for $20.
If you are worried about your daughter using the internet, you can block sites through your router, which she will use for the Wi-Fi. You can also set up an account for her on iTunes and monitor what apps she downloads. Apple tries to keep porn and those types of apps off the app store. But there are still some adult apps that I wouldn't want my daughter to see.
But if you want her to have a camera, that feature is really nice to have in the 4G, but expect to pay about $140 or so more. The ipod touch camera resolution is not as good as the iPhone is.