I owned 3rd generation iPod. It was good, especially at that time (there were not many equally good competitors). Touchwheel control is superb. Touch buttons are both good (when they work) and bad (when you accidentally hit the wrong one, which is very easy).
But if you turned iPod off and left lying on the shelf for a couple of days the battery would run down. That sucked. Perhaps new iPods have this fixed...
I now own iAudio X5. The best purchase I ever had. High quality sound with nice effects (BBE, MP3 Enhancer, pseudo surround, etc.), excellent bookmarking system (I listen to audiobooks and Japanese language course and need to bookmark in many places), builtin radio (I listen to classical music programs), builtin recording from mic and radio, no accessories required. If you turn it off and leave for a week and then turn back on, the battery is practically at the level it was a week ago. I don't need USB host, image viewing, and color screen but there was no simpler model (iAudio M5) for sale at the time. I wish it had touchwheel. Also, COWON (makers of iAudio) just released beta version of firmware which added DRM support for WMA files so you can purchase music from online stores now. Forget AAC and iTunes store with iAudio. On the positive side, OGG and FLAC are played natively by iAudio.