For the sake of a fair comparison, I think it also would be reasonable to compare the prices between the two different devices.
The PocketDish is $599 (7"/40GB), $499 (4"/30GB), or $329 (2.2"/20GB)
The Video IPod is $399 (2.5"/60GB) or $299 (2.5"/30GB)
So for $200 less, you lose the...