The iPod doesn't really support the app, not the app doesn't support iPod. You cannot have a GPS navigation system without GPS, so if your device doesn't have GPS, well, then... you're kinda out of luck. Except for using an external GPS unit as Andy points out.
Both the iPod & the iPad Wi-Fi only versions do not have an actual GPS chip in them, they rely on other methods to determine your location. You will need an external GPS device for Waze to work properly.
Some devices that connect to the cellular network but don't have the satellite radios for GPS will attempt to figure out where they are by triangulating distance to 3 cell towers. However, this requires a fairly strong signal with at least 2 towers (sometimes 3 are needed) and has rather limited accuracy compared to satellite receiver radios.
I would recommend using Waze with either an iPhone or a Samsung phone, depending on whether you prefer iOS or Android, in order to have the best possible hardware for location services.