Apple may be able to do it, but they may have no interest in doing so. The less "features" your current iPod has, the sooner you'll buy a new one to get those features.
I remember when the 4G iPods (or was it the mini?) came out with the suffle songs feature in the main menu. It took a while for other ipods to get a firmware update to support the new featuers, but eventially they did. Hopefully the same will occur in this case.
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A 40GB photo owner isn't going to be able to put all he has on a 4GB nano. If I could, believe me, I would.