I find it really funny people saying 'it's ugly' 'it's fake, apple wouldn't make a design like this' etc etc.
Let me tell you something, the photo is REAL, those ARE the new nano's. At the very least, it is a very accurate mock-up.
Here are a few points to remember:
1. Scale- these things are small, yes they are a bit wider than the current nano but a lot shorter. They are definately cute and will fit very nicely in your hand. I agree that it will feel odd wearing them on your arm for running, but will work just as well as the current nano.
2. Context- without a steve keynote and a marketing campaign, it gives you little direction to what this nano is trying to achieve and where it fits in the market.
3. Photoshop- just because it is a photoshop file doesn't mean it's fake, everything goes through photoshop and there's no reason to believe someone who had brief access to such a file couldn't take a photo of it. In addition, that photo could've gone through photoshop itself, I'm sure I'm not the only one who runs all his photos through Photoshop for touch-ups.
4. Form factor- Apple have shown that they aren't afraid to deviate as seen with the ipod shuffle. This thing is not 5.5g ipod sized, it is SMALL. You are giving a knee-jerk reaction that you don't like it because it is not something you are used to. It happens all the time in design; you will get over it and appreciate the design. Think about it, it improves the current nano significantly by removing the superflous area on the top and bottom of the click wheel and increasing the screen size dramatically. It will fit better in your pocket than the current nano.
edit- Remember, this new Nano will be replacing both 5.5g ipod AND the nano... reason: new ipod will be video-centric (think iphone)