Video on a 2" screen wouldn't make sense, I agree, but as it already has a video output to connect it to a TV, why not giving it video support? So you could not only show your family your cute little baby, but also a video of baby's first steps. ;-)
I agree that a bigger screen would make the iPod bulkier if you keep the click wheel, and it simply wouldn't be the iPod anymore.
By the way, I saw the Thomson in real and had it in my hand, it really is the same size than my ipaq (PDA), just a little thicker. It definitely fits in a pocket.
Concerning the iPod mini, well, that's exactly why I bought a "regular" 3g iPod. For a little more money (I got it at the same price than the 4g 20GB, as they wanted to sell out the 3g) I had more capacity, a cooler look (IMO), no ClickWheel (don't like it) and more accessories (remote, holster and dock).
I compared it to the iBook because of the price, I know that both things have different markets and usage. Ok, battery life is better, and 10GB more storage space (the iBook has 30GB, not 20GB), but the iBook can do a lot more things than the iPod...except fitting in your pocket, of course...
Sorry, but I still think that, for what it is, it's really way too expensive...
And concerning Steve Jobs' ideas...well, without him and his ideas, Apple wouldn't be what it is, but that doesn't mean that, as a Mac user, I have to agree with everything he says or thinks...I mean, one-button mouse nowadays and colored socks for the iPod for $29...come on!