It's very clear that the iPod has become a trendy piece of hardware. Every fashion victim has to have one (Karl Largerfeld has hundreds of them if not thousands LOL). It shows how much you are "moving with your time" (and fuck the copyright holders ?). And the distinctive white earplugs make it easy for you to show that you are "in".
I don't have an iPod, I've had an Archos Jukebox Recorder for years. It could work as a portable HD and record in MP3 far before the iPod did, there is an open source firmware that really improve it, and best of all it was much cheaper than the iPod before it was released. But unfortunately as Apple is as bad as Microsoft, iTunes refuses to synchronise with it. I still have to sync it manually (I plan to replicate my whole MP3 collection on the Archos as soon as I replace the HD with a 80 GB version, something you can't have or do with an iPod).
The problem with fashion is that it comes and goes. Nothing you can rely on. But technology is meant to be reliable. And considering the price of an iPod (349€ to 459€, the price of a 40GB portable HD is around 80€) he price to pay for something that will be outdated or outmodded in 1 or 2 years is a lot ! In that time there will be many equivalent items to the iPod probably cheaper, with more freedom (compatible with more online shops than the expensive iTMS), more battery life, more features, etc. So any asshole who want to be "in" again will have to pay again a lot of money for something that will do the same.
The problem for Apple is that they have to be the manufacturer of the next big thing. Otherwise the iPod-mania will have lasted a few years and then everyone will be gone. The area where Apple is making money might be dead soon.
The most funny part of the story is those people who rushed to buy an iPod will have a hard-time realising that the song they bought on their iTunes can't be put in their next generation player, thanks to Apple (acting as worse as Microsoft). And that if they ripped their own CDs to AAC, they might have to reencode them because so far only Apple supports AAC, all the others are going WMA. And at that moment they will start to hate Apple for doing that to them, never warning them of anything, for this pricey hardware they bought and loved so much. Going for a monopoly has its drawback. And all the sheeps that keep on joining the boat will make this an even bigger catastrophy. Too bad sheeps always get the clue too late...