Hmmm . . . this would make a certain amount of sense. Apple needs to compete with cell phones, which are reputed to soon be able to play mp3s a la the iPod (hence the new iPods that display/store pictures). from that POV, moving on to video would be a logical next step.

not to say that anyone would want to watch a viedo on their iPod–I think any potential video iPod is more intended for transportation and viewing at a separate location. however, given than even the biggest iPods could probably only hold a few hours of video, i don’t see how this would be surperior to just hauling around a few DVDs.