I still think it would be great if they made a new one, just keep the same shell and update the internals, then have WP7 minus the phone parts. Boom, instant great PMP.
Still a fair sized market for them, considering:
Personally, even with my smartphone and potentially iPhone 5 in a few days, I would never give up my iPod Classic. So much more battery life, easier to use while moving, doesn't waste my phones battery listening to music, etc.
I personally do not buy into this graph, lots of analysis would like to believe this is going to happen, however, I do not believe half of the world cell phone market consumer has the disposable incoming to buy and use a smart phone. Yeah people may buy in, but will they stay in. The monthly fees are going to be the first thing that goes when people can't pay their bills, I think the smart phone business will eventual level out at about 30% of the world market and then it is just the on going replacement year after year.