The real question is what else would you add to the iPod? A true video iPod with a nice 16:9 touch screen jumps to everyone's mind, but it is not a practical device, it would be too expensive, the battery would have a short life, it would be too fragile... The key for the iPod is desing and integration and this is what Microsoft should aim to. I can't really think of a good reason to share a song using WiFi if it only will play 3 times, if i want to share i use speakers or a split connector. WiFi to sync with your computer? For one or two songs it sounds good, but once you have more you will need extra power, and if you are going to connect the AC why not the USB?
At the end the true innovations in DAP do not come from Apple or Microsoft but from asian companies like Archos or even Sony. Palm released the LifeDrive at the beginning of this year, and there you have a device with wireless, a big memory, a big screen, audio and video capable and much more, and well, it is not a success. If Toshiba manages to keep a good design wether it looks like an iPod or a peapod, if they get a great battery life, if Microsoft provides a simple but efficient GUI and if the Zune system is as good as they promise, then the Zune DAP will be a success, and to be a success they don't have to take the market from Apple, if they get a 20 to 40% i would say the won.