Video Ipod is a waste of money except maybe for college students. If you're out of college or soon will be...unemployed, or under employed...wait, wrong commercial.
Seriously, what is the justification for having a Video Ipod? What is it that's worth the time and money to watch on a 2.5 inch screen? If anything, you're better off with a PSP, at least the resolution is higher, screen is bigger, and you can play games. There's one group of people that I see having any use for it, and that's people who ride the train a lot. When I was at DePaul, it would have been nice to have something like that for the train when going between campuses. Other than that, when would you actually watch it? At home you've got a nicer setup than that I'd hope, and it would be too shaky to watch on a treadmill. Then again if you work like a graveyard security shift somewhere I could see a use for it, but in that case, you're much better of with the PSP for better quality and picture size. When it comes to MP3 player, the Nano is hands down a better choice for the money and even better since it's a flash drive.