Okay, my two cents.
The storage upgrades of both the iPod and the iPod nano are nice, and they're not too badly priced either. The games support in the 5G/6G (5.5G?) iPod is cool (perhaps a short-lived novelty), but with all this talk of Live Anywhere making its way into Windows Mobile devices and perhaps even the Zune, it makes sense to have some sort of competitve offering.
New ways to search, new gapless playback. Very nice. 'Nuff said.
On to design. I was never a fan of the iPod mini design, and the iPod nano now looks like an iPod mini pancake. Same old story, but thinner. IMHO, the 1G nano looks more appealing, but beauty is in the eye of the beholder, eh?
The aluminium casing is a nice touch, and will probably help reduce the number of scratches.
Now, iTunes 7. Good, bad, and whatever happened to Apple's WWDC "Redmond, start your photocopiers" campaign? Echoing Jason's thoughts, the album view is almost a clone of Windows Media Player 11. 8O Cover Flow view is a nice, geek-appealing touch, but be sure to have high-resolution album art, or it'll look like trash (at least iTunes is now offering free album art for music in your library).
An interesting addition to the iTunes library: Album Artist. Those of you very familiar with Windows Media Player will know what it's all about. Previously, I had issues sorting media in iTunes, since I'd have an album with guest artists, a single Album Artist tag, yet iTunes wouldn't recognise the latter and thus jumble everything up. That's all changed. iTunes 7 now recognises the Album Artist tag embedded in the file, but it has a bug. It appears in the Get Info box, but it doesn't appear in the library. You have to launch the Get Info box of
every track to "refresh" the track's status in the library before the contents of the Album Artist tag will appear. That, my friends, is a real pain in the ass.
Update: Or the quicker solution, which I just discovered. You can nuke your entire library and the relevant ITL and XML files in the iTunes folder, and then re-add your music. Sigh.