Let's be positive first. At 15GB capacity (in the case of the model I've been given) it is clearly unrivalled by devices like MP3 players with a puny few hundred MB of RAM, and this feature alone would be enough to justify its place in the market. That's understandable. The AAC compression does a fairly good job of fitting loads of data into a small space and, not being a hi-fidelity freak, I won't venture an opinion on whether it is any good in terms of its audio reproduction. It's good enough for me. I can't complain too much about the touch sensitive controls or their design and layout, although I'd kind of like to have a more positive interaction with them - I'd prefer silent movement to a few audio clicks, although the audio clicks may be better than nothing.
However, its physical design is daft and the accompanying iTunes software is flaky. No doubt it looks cool sitting on a shelf in silver and white, but you can't touch it without smothering the metal in highly visible fingerprints and white is hardly the best choice for a portable device. There's no protection for the screen, and at least in the edition I received, there isn't even any sort of protective sleeve. I've no doubt such things will be available for purchase once I have a look around, but I think it's pretty shoddy not to ship one in the box. It doesn't have to be a good one - by all means encourage people to splash out on getting something better - but there ought to be something.
Once installed, the iTunes software has a reasonable range of functionality for managing your music, but installing it wasn't straightforward. In fact, I had to kill off the installer when it became plain that part of it had given up. I don't know how long it is since I had to do that to an installer. Once installed, it functions OK so long as you just import music from CDs. Don't edit anything anywhere though, because if you do the whole program will crash when you try to import the next disc. Updating to the most recent version of the software, as it prompted me to do yesterday, has not fixed this problem.
I was disappointed to find that while iTunes seems to be able to transfer "smart" playlists to the device (playlists based on picking selection criteria) it doesn't seem to do anything with "dumb" playlists, to which tracks have been manually added. I won't go overboard on that, as I haven't tried very hard and it's possible I've missed something, but it seems a bit of an odd omission if it really does work like that, and some poor user interface decisions if it doesn't.
In summary, Apple currently have a clear lead based primarily on storage capacity, but there is plenty of opportunity for someone else to produce an iPod-beater.
For anyone who doesn't get the reference in the title, the Pod People are a bunch of music-loving but brain-washed Muppets featured in The Dark Crystal <evil grin>. There are also other sci-fi "pod people", but them I have not seen. I'm given to understand I may not be missing much.