My DD13 just bought herself an iPod touch. I was leery of the price tag, $300, but that is one totally cool piece of hardware. The screen is so much bigger than the iPod video for watching movies, and she can get on the internet anywhere there is WiFi (such as a Starbucks, hotels, etc.). It is just a really cool gadget. If I were buying an iPod, I would definitely invest in one of those.
I think most movies are $9.99 or so on iTunes, but there are a ton of free TV shows which my DD downloads, like "Monk" and some teen shows.