Touch? , the feature you are asking about - is Usb HOST ability. Aka ability to connect usb storage devices, like Flash disk, or camera (drive mode) or mp3 player (drive mode). Unfortunately, no palm has such ability. Only some Pocket PC devices have Usb Host (not sure which though).
Even though fat 16 can support up to 2gb, Palm prior to TT5 and LD can only accept 1.5gb (even thought there might not be such capacity cards). So it might be that if you buy 2gb sd-card, you will only be able to access 1.5gb of it. I heard that there is some hacked fat32 driver for palm (taken from LD) - but last time i checked - it had some problems , like inability to write, but only read.