- The device is too small to comfortably control - certainly not with your thumb!
- The screen is too small to view photos - why bother making it colour?
- Enough has been said about the scratching, which, unfortunately, holds for the iPod photo as well.
What is most critical is that Apple have released too many products in too short a time - the mini, the shuffle, the nano (which also competes in the shuffle niche), and the phone - they're wearing out their customers, who will eventually become annoyed that they can't own the most recent thing for long enough before it stops being the most recent thing. The only thing that's keeping the iPod above the competition is the iTunes integration, same as with their computers and the operating system. However, the OS will eventually be hacked to run on other vendors' PCs, and as podcasts (which are also supported by a number of other programs) rise above bought music in importance, and internet radio services such as Pandora, LaunchCast and AudioScrobbler become important, iTunes, too, will no longer push sales of the hardware.
Edit: Ladies and gentlemen - I proclaim it official. Hot on the heels of the iPod nano scratches (and I thought my iPod colour was bad!), we have this report of Apple charging extortionate license fees. May the iPod rest in peace.