The iPod is a wonderful piece of machinery.  I was a late adopter, but I'm a full convert now.  I've used some other mp3 and video players, and nothing is quite as sexy as the iPod.  My only complaints are the following: 

1. Navigation.  The clickwheel was a novel concept, and it's good for moving quickly through long lists of albums and songs.  But it doesn't have fine-tuned control, and that's a problem.  Pretty much every time I try to navigate to a specific item in a list, I accidentally overshoot it by one, then I overshoot it again on the way back.  A solution would be to give the user some tactile feedback so he/she could "feel" each item in a list, kind of like the volume dials on many car radios.
2. Scratches.  The screen gets scratched easily, but oh well.  The more easily-fixable scratchable surface is the beautiful stainless steel on the back of the device.  I realize a scratched back surface doesn't affect the functionality of the iPod, but it's the thought that counts.  One solution would be to use titanium, or some other light, hard metal.  I would say tungsten, but it's heavy (unless that's what you're going for).
3. Podcast sorting.  Podcasts are essentially recorded radio programs, and they're broadcast in chronological order.  So why would I want to listen to the newest one first?  That's how the iPod does things, and I would at least like the option to do things my way.

That's really it.  Otherwise it's the best device ever invented, besides the Xlerator.