The iPod shuffle looks like it might work out for those with a very limited music library or those who are physically active and don't want to risk pounding the pavement with a hard-drive based device like the iPod.
Otherwise, I see no reason to go with the iPod Shuffle. Even the price difference is not that great when you think about it. $149 will get you a 512MB Shuffle but for an extra $150, you can get that 20GB iPod and have 40 times the capacity with all the bells and whistles (for another $100 you get 80 times the capacity). To me, it's a no-brainer.
One of the little things I discovered recently that just amazes me about the iPod is that it keeps data on every song you play and transfers that data to iTunes so you always know what songs in your collection are getting the most play and when was the last time you heard it.
I live on playlists and select them based on the mood I'm in. The iPod Shuffle doesn't give you that option. All your songs are on a single playlist and you get what you get. So if at all possible, get the real iPod.
Apple has LONG had a two tiered product offering ... Macs vs iMacs, PowerBooks vs iBooks etc.
I just bought my fifth Mac computer (I'm one of those) ... and I have never regreted opting for their high end line. I'll be getting a 20 or 40 gig iPod, a Bose SoundDock ... and maybe those amazing Bose headphones.