I used a Toshiba Canvio 1 TB external HDD directly attached to the USB
port on the Touch for many months. No sound issues at all. It is
probably larger than what you are looking for but some external
non-powered HDDs do work. Just be careful about return policies if you
run into issues.  Each persons library is diffferent and there are many
factors that affect how tiny usb works

http://forums.slimdevices.com/showthread.php?82070-Touch-with-USB-drive-mastering-TinySB&highlight=mastering+tiny

the above is well worth reading for those who want to explore this
option


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