Its just another way of linking the Apple brand to the iPod. I think your missing my point. I'm not saying redesign the interface, I'm saying skin it with Aqua. This could be v1 of the color, which leads to a video iPod eventually, though, I think the ideas a wasted one. Where are you getting these videos from? I'd think the Quicktime Video Store is a long way away simply in the statement Jobs made about instant gratification. Remember, a lot of the world is still on dial up, do you really want to download an entire video on dial up in full quality. Also, consider burning, not everyone has a DVD-R and I think execs, while may be willing to allow some extra burns on iTMS, but they probably won't like people being able to burn a DVD 10 times.
I really think the video iPod is a waste right now, but a color screen with the same interface skinned to Aqua, like a T616 Sony Ericsson phone, would be cool and get some extra purchases, because then they could include picture viewing for the card reader feature.