How can i save my pics from my ipod touch 4G after an update?

You should be importing all pics taken with the ipod to your comptuer regularly as you would with any digital camera, particularly before any update or restore.

iOS: Importing personal photos and videos from iOS devices to your computer

How do I delete the photo albums already on my ipod? They are using all my space.

- If the photos are in your iPod Camera Roll album (or Saved Photos album on early iPod) just select the photo and tap the trash can icon

- If they are in another album than they were synced to the iPod and yo need to connect the iPod to your computer and unsync them. See:

iOS and iPod: Syncing photos using iTunes