I seriously doubt [insert obligatory Intel rumor disclaimer here] that Apple is going to release a vPod. The built-to-be-portable iPod is just functionally counter-intutive to watching feature length movies on its tiny screen. And movies require about 1 1/2 hours (or more) of your undivided attention. Even with shorter content (music videos or TV programming - maybe) that require less time to watch, streaming video is going to be much harder on that tiny hard drive than songs. I don't know off the top of my head what the specs are for the hard drives that Apple uses in its iPods, but I would be surprised if it could handle sustained video content.
If video content is really on Apple's plate this time, then a video enabled airport express makes much more sense. A computer's hard drive (and processor) could obviously handle the streaming chores, and Apple has already seeded the concept of an airport express connected to your living room stereo via iTunes, which is also video enabled. Your TV is likely right next to your stereo, hooked up to it, or at least physically near enough to it.
But the whole movie download concept just doesn't sound like a great idea, at least not yet. If Apple gets into this, I like to see them do it in a big, unexpected way, which to my mind means getting H264 encoded HD movies into the pipe. There are a couple of problems here. One is H264 HD (which looks amazing, by the way) currently requires a lot of processing power to decode. You're pretty much looking at a G5 machine to do it. Second is download size, which for any movie is huge, especially HD. Dial-up is out. DSL is probably doable, but will still take a lot of time depending on your DL rate. High speed cable might be okay, but it's still going to take a lot of time.
If a movie download service is going to catch on, it would have to be presented along the same lines of usability as music downloads are today. In other words, it would have to offer an obvious advantage over the current mass-consumption model of renting/buying DVDs. Offering HD content would be one advantage, but then again, back in the early days of videotape, Sony's Betamax format looked better than VHS, but VHS won the format war. Laserdisc quality (video and audio) was much better than both videotape formats, but it never caught on with the average consumer. So HD content is, at best, only one part of a solution. The other is bandwidth. Right now, you can download a song in seconds. It's the holy grail of consumerism: instant gratification. Movie downloads, on the other hand are huge, GBs in size. You would need a lot of bandwidth to suck it all down, and its going to be slow even on broadband connections. Nothing like the ease of downloading music is today.
When internet access speeds are commonly 20 or so megabits/sec then an online movie download service would probably make sense. Or if someone comes up with a miracle compression technology that can squeeze an HD movie to a size small enough for today's broadband connections. In any event, when the technology exists (or comnination of technolgies) to d/l a HD movie in, say 10 minutes (remember, this is the general public whose dollars you're after for this market, not geeks or fanatics), then you might have something. Until then, DVDs will likely remain the overwhelming technology of choice for watching movies.
It wouldn't shock me if Apple put out a "video capable" iPod for music videos, but thats as far as I see video going for iPods. Things could get very interesting soon if a video capable airport express came out with software that easily allows, for starters, iDVD, iPhoto, and DVD player (with surround sound) content to stream to your living room TV. That puts a few intrinsic pieces of the big picture(tm) into place.