The new iPods don't have a hardrive, but rather run on a flashdrive disk, which has no needle to speak of, so it won't skip

The battery life will suck out like crazy compared to just music play. Remember, that little device must decode the video in 30fps and display the different colors to the pixels on the screen. When music playback, all it displays is the progress bar.

I wouldn't recommend the insurance if you can DIY for fixes like battery replacements, and there are many sites where you can purchase parts. Besides, consider how much money you'll put aside before it breaks and then you'll have to deal with the claims department who'll throw you through hoops before giving you the new pod (or stiff you with repairs instead....)

My two cents