Either Kevin Rose is on crack or Apple is.
Why would you come out with a lower-end iPod with a color screen for the same price as the 4GB iPod-mini? If this rumor is true, Apple needs to update their entire lineup and pricing schemes.
Now that Toshiba is shipping 40GB 1.8" drives for their Gigabit players, Apple should use those to put in the minis. Make the mini the same as the iPod-photos just sleeker and at $249.
Then put more capacity into the regular iPods plus Sirius. It'd also be nice if they finally integrated the larger iPod with a PVR solution. Heck, I can already take my memory sticks and toss them in my friend's TV to watch recorded TV. Why shouldn't I be able the same with a firewire connection from my iPod?
Then I'd dump the 512MB shuffle and drop the 1GB shuffle to $99. This would open up a place for the Nano... although it'd either make the shuffle less attractive (if priced at $149) or it wouldn't make much sense to buy a Nano when a mini at $50 would have significantly more storage.
Honestly, do we really need a 4th type of iPod?!?!?!