I think a lot of people are missing the point of the changes.
Nano: I have a nano with video and I never use it. Never. I don't record video with it. I don't watch movies on it. Why not, well...I've an iphone for that. My Nano is for the gym. And that, my friends, is likely the whole big point. Why bother keeping video on the Nano if it's almost never used? If recording video/watching movies and such is done on phones and iPod touches?
Essentially, Apple cleared the slate with the nano and shuffle, making them dedicated music (and anything else you can listen to) players. Let's face it. Most people want either/or. Either a phone/tablet that they can watch movies on, surf the internet on, play games on (while maybe listening to music) OR a little device they can clip to their pocket and listen to music (or whatever) while walking, exercising, etc. The Shuffle is the cheap and simple one that those on a tight budget can afford. The Nano is the fancy one that offers radio, help with your workout, etc.
This, I think, is Apple's logic for the changes in the Nano. It really is a fancy shuffle, the right size and ease for those using it to exercise vs. a Touch, for those who want to do other things.
I do not know if this is a wise or smart move. But it does make both Shuffle and Nano perfect for people exercising or on the go, or doing something else with hands and eyes. People who just want to listen to music, radio or podcasts.