HumanJHawkins said:
You are missing the point... The video iPod will be a replacement for DVD players. You will still watch the movies on TV except for a few people who want to take them around. You will just dock the video iPod to the TV instead of renting a DVD.
Or you could call it a "smart video casette" -- you're just using the Video iPod as a smarter-than-a-casette-or-dvd storage container for your movies.
On the hardware side, all it would need is an extra port (for video out) and an adaptor that converts from its video out to RCA video, and an adaptor for converting from headphone jack to RCA left and right (those adaptors are out there already, IIRC).
OR a dock that has those on it.
OR a super-dock/set-top-box that ads in some extra features, such as a remote control for controlling it like any other movie player. And the part I would hope for: the set top box would have full DVR capabilities. Possibly this could be a Mac Mini based product. You might also have this box be used a direct-to-ITVS station (and then the video ipod becomes a means of taking your movie to your friend's house).
On the software side, you'd need a 'rental' mode for the movies (as others have pointed out, for a lot of people it's not going to be like music that you buy once and listed to a lot, there's going to be far more people who want to rent them, or a netflix like subscription model, or even both). I think a netflix like mode would be great here: for a monthly fee, you get any 1-5 movies you want, and can swap them around for other movies whenever you want.
And you'll need something other than the current "authorize 5 computers to watch this" model. Something like "I can watch my movies on these 3 computers OR anywhere my iPod is hooked up, as long as the movie is stored on my iPod". Though, you only need this if you use a set-top-box model. If it's a video port that gets added to the iPod (the first hardware thing I mention), then you don't need this part.
But, the short version is: I don't see a Video iPod as being a portable movie watching box, I see it as a smarter movie storage box that lets you put more movies in it, lets you have a strong UI for managing its content, and uses some form of DRM to protect the content on behalf of the movie industry. I'm sure it will LET you watch a movie on the 2" screen, but I sincerely doubt that that will be its primary "video" purpose, if "video" includes movies.