My iPod approach is slightly different.
I got beautiful black iPod Nano for my birthday.
It's only 2gb but hey! I only use it for music on the move. I'm still having to do a day or so window cleaning (I'm nearly out. THAT will be the final bit of JW residue out of my life!) it really helps pass the time.
I've no intention of getting a docking station. A simple interconnect and it goes straight through my HiFi
I'm a bit of a dinosaur tho. I really object to paying money to download DATA! So I buy my music on CD (I want to feel it, touch it, look at it and put it in a rack!) and I rip what I want onto the iPod.
That said I love my Nano. Recently they upgraded it (after only 8 months on the market, WTF) My wife said "don't you fancy the new version" My answer is always the same. You decide on your budget, buy the best you can and something you're really happy with, and then you jump OFF their merry-go-round of desirability!