I don't buy extended warranties on any of my small electronics, because I'm usually ready to upgrade before they break or become unuseable. I love gadgets, I admit it.
I also admit that almost all of my electronics were bought refurbished: My Sony Reader, my Kindle 2, my Ipod. I've always had really good luck with refurbished items -- I read somewhere once that the reason refurbished electronics are a good value is because the quality control is more consistent on them than on new items. Refurbished items are always tested for functionality whereas new items might only be randomly tested. I have no idea if that is true or not, but it works for me!