Let me begin by stating that I'm in love with this device (I knew I would be and now wish I bought one earlier). I've had the device for two weeks now and have been using it non-stop. Though there are a few minor things that need to be fixed, for the most part it is a very solid device.
I ended up getting the 2G 10GB PC version (there damn well better be some way for me to move stuff to it when I'm back in Linux). The differences between the 10/20GB versions and the 5GB version are pretty substantial. To start with, the 10GB+ scroll-wheel is like a trackpad (the flat area on a notebook where you slide your finger to simulate the mouse) instead of an actual scrolling wheel, thus giving the device no external moving parts. The 10GB+ also gives you "better" headphones. I dare say I have pretty discerning ears when it comes to music and really fought against using the packaged headphones instead of my beloved Sennheisers, but due to the nine foot cord on the Sennheisers, the supplied bud-style headphones have proved to be a bit more practical for campus life and have naturally become the main ones that I use, despite the fact that their sound quality leaves a lot to be desired. The 10GB+ models also come with an in-line remote control and a carrying case. The case comes across as pretty cheap; the iPod fits it well, but it offers no way for you to touch the buttons (guess that's what the remote is for) nor does it cover the sides of the iPod.
There are three semi-major problems I have with the operation of the device. One of the most annoying things is that ~90% of the time, after initially filling up the industry-leading 32MB buffer with the beginning tracks of a new album, it mysteriously skips past the first track and starts playing the second track. This makes me insane!!! I'm assuming they will fix this in future firmware updates (it's firmware upgradeable) as it a pretty big nuisance.
Another thing I really can't stand is how it actually moves the files over to the device. It is done through a MusicMatch plugin. For those of you not in the know, MusicMatch is the lamest, most bloated thing I've ever seen. It is ridiculously packaged and not aesthetically pleasing in the least. I would have much preferred a small, simple program from APPLE (you know, the makers of the damn device) than the setup they throw at you. While it does the job, it's just annoying. Period.
The third and most inconvenient thing is how difficult it is to actually remove the cable from the device (ie, when it is done charging/moving data). The connector really sticks and it doesn't help that it is quite slick. Sometimes it takes two or three tries to get it out. I wouldn't be so bothered by this if I didn't have to deal with it so often, but I charge it daily.
The iPod handles ID3 tags very nicely (at least up to v1.1, haven't tested against version 2.x). All sorting, be it by the artist, album, or genre, is done through ID3 tags. It could be a little more robust in this area though. One example is when a track name in an ID3 tag contains the track number, it should not display the number on the device. Another example is when there are no track numbers in the respective ID3 track number field, BUT, the album, artist, and track names are present, it should be able to discern from the actual file name (assumed to be preceded by the track number) the order of the tracks.
This being my first FireWire (400Mbps) device, I was pretty impressed. It's mad fast and that speed is much needed — I couldn't imagine trying to move 10GB across a USB 1.x line.
The battery life is SUPERB. Really incredible. The specs claim 10 hours and I have to say that it is very near that. Quite impressive when you keep in mind that it is powering a hard drive (one of the ways it keeps the power level down is the 32MB buffer — the HD spins up, fills the buffer, and then spins down). This leads to another minor gripe I have: playing files that are > 32MB keeps the HD spinning, drastically reducing battery life. This needs to be fixed.
One last very impressive thing about the device is its output power (30mW RMS per channel). It has no problem driving my Cambridge Soundworks Digital FPS setup (those speakers are obviously externally powered, but the point I'm trying to make is that the sound still comes off quite full and warm, not weak and drowned out).
As I've said for a year now (without even owning the device), if you are looking for an mp3 player, there is NO competition — get an iPod.