On my server, I have a pretty decent sized area that I want to protect from Towny towns. Would WorldGuard work for this? Is there even such a plug-in that will do this?
Yes, WorldGuard should work fine for protecting areas from towns.
I'll assume you already know how to use WorldGuard. If you are not familiar with it, go through the basics over at the WorldGuard Wiki.
This will prevent people from claiming areas within the region by blocking the associated commands.
Hope this helps.