Originally posted here by MsMittens
iPod as a hard drive article. It's been done before. It's part of why the British Gov't banned iPods from being used (easy data transfer). Some iPods can be used for booting a Mac, IIRC. I've used it to transfer photos but no reason why you couldn't use it for other things.

There is a hack out there for some iPods: apparently they come with a microdrive. There's a way to remove it and then use it in a digital camera that supports microdrives. Haven't done it yet since I don't have a camera like that... but hey! anything is possible.
On that second part of what you said I can clarify. What had happened is that there were some sort of drives in an MP3 player (I can't recall if it was I-Pod, I think it might of been one of it's competitors) that could also be bought retail for digital camera's. Thing was, the drives bought retail sold for like 600 bucks, so people who were techno smart would buy like 10 MP3 players, take the drives out, and sell them on ebay etc for like 400-500 making a nice big profit.