My 1st generation Nano was part of the recall and they sent me the tiny, postage stamp-sized 6th generation Nano as a replacement. While I was glad to get a new iPod with larger capacity and an FM radio, I kind of miss my 1st gen.
Same thing happened to me. The 6th gen nano was nicer for working out, but I really liked the design of the 1st gen and wish I still had it.
Ending the program makes sense. In all reality, the number of 1st gen out there that are still being used at this point is probably pretty small.