I think that the Apple name - even if it isn't the best technology - and a number of other factors mean the iPod is here to stay.
I just bought an iPod video last week (having already had a Shuffle and a 2Gen model) and, I've just got to say, I love the thing.
The biggest things Apple has going for it are:
1) iTunes.
2) Name recognition.
I bought my first iPod because, having used iTunes to buy stuff, it was the easiest way to export it to an MP3 player.
My iPod video also serves as a sort of PVR (I bought their damned proprietary video cable), it's just great.
I do use itunes. Great service, and if I want it to be an mp3 instead of mp4, I just use ijukebox conversion software.
But, I would never buy an Apple computer unless they became much cheaper.