You realize that Staples coupons usually don't exclude iPods, and you can get $25/$100 in-store coupons on eBay fairly easy...
like here. (Make sure you get the ones that work in-store...and don't puchase the coupon until the day you use it.)
$199.99 - 8GB iPod
-$25.00 - $25/$100 coupon
$174.99 + tax (tax will be calculated on $174.99)
All your savings is upfront...no $20 more to spend to get your discount. And depending on your tax rate, you should come out slightly ahead, even when adding the $1.47 for the coupon...since you'll be paying tax on $195 at Target. My tax rate is 8%, so that would be an additional $1.60 at Target.
...plus, you'll get to use that $100 Staples card.
EDIT - To save even more, order it online and use a $30/$150 online coupon...
like here. That coupon is more expensive, but it will save you another $2. Every little bit counts. Although personally, I'd do it in-store.