A pretty good fake, but a fake nevertheless.
Evidence, some of which others have pointed out above:
-The timing is a bit off.
-There would probably be a info bar at the top showing the battery level. This would be hard to add if it were fake and was probably skipped.
-The top left of the screen was always just out of sight, so you couldn't see the lock icon, and the iPod was at an angle so that you couldn't see what position the lock slider was in.
-It doesn't really seem practical. You can only see a couple tiny covers on each side, which isn't useful for scrolling through songs at any decent speed.
-Engadget posts any decently faked rumor they are sent.