Both the iPod Touch 4 and 5 will serve you well for development.
If the iPod Touch 4 has still iOS 5 installed, then you can test iOS 5 on the phone and iOS 6 in the simulator. But even if your device has iOS 6 installed, you can still develop for iOS 5. With the simulator, you can test other iOS version.
It's similar for the screen size. You can write apps that are compatible with both screen sizes and you can test them both with the simulator.
Of course, you cannot test telephony functions on an iPod. But this doesn't seem to be a requirement.