That device will transfer the photos from your camera media card onto the HD of the iPod, but unfortunately I don't think it will put them in the right place for you to view them on the spot on the iPod photo. All it's made for is unloading your card so you can take more shots; not so that you can preview them. I could be wrong, as I don't have any experience with the ipod photo, but I know that device has been around longer than the iPod photo, which makes me suspect it doesn't support any more than just transferring the files.
If you don't really need to view them in the field, then it would be cheaper to just get a lower-end iPod, like the 20GB, which is $300. That's vs. $500 for the low-end (40GB) Photo model.