I am planning on porting my games to iPhone/iPod Touch and was wondering what is the best device to get? Perhaps the newest 3gs iPhone and an old iPod Touch to cover the slower models? Is there an emulator on the mac that you can develop with so you don't even need a real device?

There's an emulator but it's certainly better to use an actual device to test on as the simulator. an iPhone 3GS or 3rd gen iPod Touch would be fine for testing (and gives you the OpenGL 2 features to test against).

It's possibly worth getting the iPhone if it's going to be your only device as using it as an every day phone will let you build up the usual amount of junk apps on the phone and get a representative amount of memory usage, lack of clean restarts etc.