On one hand, I often put down my iPod Touch for a few minutes to do something, only to return and find it already locked. On the other, turn off unlock would be an issue if I lost the iPod Touch since then someone can find it and look though the personal information.
After googling on and off for a few months, I finally find a way to set the auto-lock function on my Touch for 15 minutes. I can confirm that this works for my generation 2 iPod Touch.
To do this, you would need a jail-broken phone with either SSH setup or iFile installed. The instruction is here: http://modmyi.com/forums/file-mods/725740-auto-lock-timing.html .
For posterity, you would need to edit the file located at Applications>preferences.app>general.plist, and add a new entrie in the following section:
<string>setScreenLock:specifier:</string>
<key>validTitles</key>
<array>
<string>1_MINUTES</string>
<string>2_MINUTES</string>
<string>3_MINUTES</string>
<string>4_MINUTES</string>
<string>5_MINUTES</string>
<string>NEVER</string>
</array>
<key>validValues</key>
<array>
<integer>60</integer>
<integer>120</integer>
<integer>180</integer>
<integer>240</integer>
<integer>300</integer>
<integer>-1</integer>
</array>
As for the concern that locking the iPod Touch would make it harder for someone to return it if lost – you can always add your contact information to the photo you show at the lock screen.