Can I update apps on my ipod when it's full via itunes? My iPod Touch 8gb is pretty full, so I can't install the vital angry birds updates and so forth.

Is there a way I can upgrade it during sync to iTunes that works round the space without taking all the music off, upgrading apps, then resynching music?

(and by my iPod I mean my son's)
Yes, you can download the apps onto iTunes on your computer. Then, provided you already have app syncing turned on between the iPod and iTunes, you should be able to seamlessly have the updated versions sync over. You can do the same thing to perform iOS updates when the time comes.

That said, it can be frustrating in many scenarios if the iPod touch is so full that you can't even download an Angry Birds update. I may recommend finding a way to lose at least a few songs or apps here or there if possible.