Apple would be smart to improve the iPod line. Facing market saturation, they really need to find new products to keep the people upgrading. My Z2 handles video well for me, but I am hoping that an iPod that does video will also have a ginormous hard drive (80GB+) to store me entire music collection.
Time will tell. The iPodLinux project is proving that video on the iPod is possible. Even though Steve Jobs said that they weren't interested in doing a video iPod, maybe Apple is running out of innovative ways to improve the iPod revenue stream. They'll be able to sell video's through the iTunes Store and (maybe) not face the same strict greed from the record companies because the videos aren't competing with the existing CD sales.
OT: You know, 5 years from now all of this rampant speculation and rumor-mongering won't amount to much. It's amazing how much we put into each little smidgen of info., true or not. I include myself, of course.
OT: Brian, you're doing a great job of finding information for us. Keep up the good work.