There are a few MAJOR things wrong with the new Ipod Video:
1. Small screen. C'mon people, don't you see what Apple is doing there, it's call market share. Obviously, they won't introduce a widescreen Ipod, because if they did, then they would lose all the money they would otherwise make with this crappy Ipod. So, they'll make millions with this one, and then release a widescreen version, so the people who waited go out and buy and the people who have money to burn go out and buy it to replace their current small size Ipod Video.
2. No support for Divx, or Xvid. Obviously, this makes sense as well. Apple has never been a company for the consumer, it's always been about Apple and how they can make more money. You know they can't allow Divx and Xvid support because those kind of formats are readily available on any bittorrent site, or P2P networks. What does this mean for Apple, well it means that nobody will pay 1.99 for a tv show when they can download it for FREE, like it should be. So instead, they only allow MPEG support which is a medium that not too many videos are encoded in, therefore only hardcore people will convert to Mpeg4.
3. No fast forward. Gee, wonder why they couldn't put this simple feature in. Let me guess. When you download a video from iVids or whatever site they create next, it will most likely have some ADS in it. You won't be able to fast forward through the AD, and therefore Apple will make more money because it can almost guarantee the AD being seen, all at the expense of the consumer. Watch out for FREE videos from Apple, with ADS in them, as this will be another revenue stream for Apple.
Conclusion: Sony PSP will reign king of video media when the new Datel 4 GB HDD + Battery Pack comes out. The PSP has a bigger screen, better resolution, better interface and fast forwarding. And now, AVI support through homebrew, YAY.