I don't think video would sell well among non-techie crowds, as it is difficult and time consuming to convert DVDs to video files... Not to mention in, at the very least, the legal grey area to do so in the USA with the DMCA.
And Apple is a US-based company, so it's not like they'd really want to risk it, by providing easy-to-use video-conversion software, either...
Now, larger hard drives, certainly. Larger hard drives, and smaller iPods - very possible. Most people can find a use for an external disk, which is what an iPod usually doubles as - seriously, who needs to carry that much music at once, that you fill a 60+ GB iPod?