What is positive about your post is the questions you have asked yourself about what you need and the best hardware to meet that need within your means. It also seems that you've decided to get the iPod and are asking if it is a wise choice.
Based on what you discuss it could be a good idea. I have a16GB 2009 Nano and I use it still, in addition to my 2005 iPod Photo. Like you, I use the Nano for audio instead of my iPhone. Yes, the drive is small by current standards, but you can work with this.
As your music library is much bigger than the 8GB drive on the iPod you will have to deal with changing over the music on the device, but that isn't a problem, indeed it may be an asset if you want to think hard about the choices you need to make as to what songs to put on the iPod. It may give you an encounter with some of your collection you have not played for some time.
As to other audio, such as podcasts, these need to be deleted and updated constantly so if that is part of your audio experience it would similarly work well with a small iPod drive.
In the fullness of time you will be able to manage a bigger and/or more modern iPod but I think this is a fine place to start, especially as it will supplement your iPhone.
Although you don't specify your computer platform I can tell you that my Nano still works with the current operating system on a Mac (Big Sur) and in the place of iTunes, which has been retired, I use the Music app and Finder to access the device. Some earlier iPods such as my 2005 iPod Photo no longer work with the modern MacOS versions. How much longer the Nano will be compatible with future MacOS versions remains to be seen. If you have a Windows computer the same might apply, although given that Microsoft can't manage to issue OS versions with any regularity it is anybody's guess.