I've got a video iPod - and I love it. iTunes has a pretty decent library of shows for legal download. I think their $1.99 price is really the sweet spot. You can put movies (even protected dvds) on your ipod, but the encoding (to get the video to the right resolution and size) can take a while. This is one thing where how fast your computer is can be a deal breaker.
Redlemon brings up a good point about possible developments in iPod land. There has been serious speculation about major upgrades to the iPod line, including larger widescreen displays and even networking abilities. There's even a possibility that a PDA type capability may be added with Apple's recent touchscreen patents. If I were in the market now, I'd try to hold off for a bit. It would be bitter if you bought a device and something radically cooler came out within a few months. On the other hand, you can play that game for years and never get to enjoy a cool toy...
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Cogito ergo spud -- I think, therefore I yam
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