OK, I'm about to move my music collection on to my Macbook, this amounts to some 40GB of data, beyond the capacity of my iPod Touch 32GB. What happens when iTunes tries to sync my music? Is there a way I can tell it what music to give preference to, or what not to sync?

Yes.

The best way is to create an iPod playlist which syncs. It will create and populate the playlist automatically. You can change it of course to include what ever you want.

I have a smart list for my iPhone which selects about 10GB of music (this allows space for photos, app, etc). IT chooses a random selection of music. I also have a play list which chooses the top rated tracks, and that gets synced too.

The way I do it is to use the automatically created playlist, then add a condition to it so it excludes all songs with a 1 star rating. Then when I'm using my iPod I can remove songs from it by giving them a one star rating.

That means you've got space to add new stuff.

You could also sort by least played, so you hear the less heard music more. It kind of balances out after a while, and your selection varies.

Least recently played is also a good criterion, and you can combine it with least often to get a good mix. As mentioned above, use star ratings to filter even further.