A MP3 player and a CD player are fundamentaly different things.
The CD player contains no internal data. The media is physically separate from the device.
The MP3 player requires internal storage. There is going to be a lower limit to the price of such an item.
I'm thinking manufacturing. It's easier to manufacture a MP3 player. It's cheaper to ship MP3 players. And it's cheaper to package them.
If I were going to do a business model for the Chicoms, I'd ship them with basic software and let the kids load whatever they want on it.
They should be able to get down to 25 bucks. When you get right down to it all an MP3 player is is a flashdrive with some audio playing software and a headphone jack. Flashdrives are already down to $25 http://www.bestbuy.com/site/olspage.jsp?skuId=5553386&type=product&id=1055388009930
a headphone jack should be able to be added for pennies, the most expensive thing to add is making the audio software small enough to not eat too much space.
An IPod with Apple Lossless is a good as a CD player.
Add Shure ear buds and you have the highest quality music.
I only use MP3 for audiobooks.