difference between nano?

basically the same (UI-wise and functionality-wise) but, as you said, the nano comes with a flash drive. this allows it to be faster when searching content (especially when using cover flow) and, and that's the most important thing here I guess, to be much smaller and lighter than the classic, which is what some people want. I saw one two days again and it's really small 😀 about half the size of the classic I'd say (in height).
the downside is that you cannot store more than 8gig on it 😟

Cover flow is a function that lets you browse the music on your iPod by scrolling through the album artwork instead of a list of album names. It was previously only available on iTunes but was added to the recent iPods.