I'm sure it would be the best thing ever if it was made by LG or Panasonic...
I have a 2 gig 2nd gen iPod Nano and it's not even half full, and my PDA's 2 gig SD card is only a quarter full and it has a bunch of videos and programs on it. (You can fit a lot on a device if you transcode the files to the screen's resolution.)
How many people honestly fill their 50+ gig devices to capacity and listen to / watch everything on it on a consistent basis anyways?
Am I saying it's the best thing ever? No. However it's not utter crap either, just because you can't afford one.
It would be better with a hard drive, just like the iPhone would be better if it could act more like a real PDA.
EDIT: Has anyone even looked at Apple's website before flying off the handle?
http://www.apple.com/ipodtouch/
It's an iPhone without the cell service. It looks like it runs the same interface, the screen's bigger and higher resolution than the current iPod's and Zune's, it has built in WiFi, and you can buy music right from the iTunes service without a computer. It does more than just play media. But like you said, it's primary flaw is storage capacity. Multi-touch screens must be expensive.
They should be marketing it as a PDA, not an iPod. (:lol: "The Newton is BACK!")