You really can't go wrong wth either
I have both. Ipod touch 4th gen and Nexus 7 1st and 2nd gen. We also have Ipad mini.
Kids really enjoyed ipod touches however since Ipads arrived on the scene the touches get less use.
The touches are more durable for sure however if you use a rubber case the Nexus 7 can hold up as well.
I am not an Apple fan but the rest of my family is. Apple is a bit more kids friendly than Android especially for younger kids.
I would be a little concerned about being stuck on IOS6 eventually this could be an issues as newer products come out.
While updates do not come as fast as I would like, Google's own products (Nexus) are generally updated to stay working/current. Google takes care of their own Android line, better than they do competing Android manufacturers.
In the end I think I would go Ipod based more on your kids ages. The ipod is more durable,and a bit more kid friendly. The N7 is more of an adult toy vs. the Ipod. Eventually they will be more likely to outgrow ipod touch vs. the N7, but you can cross that bridge down the road.