I haven't touched iTunes Match yet. But technically speaking, the word you're thinking of is Planned Obsolescence.people aren't stupid - they've seen the Nano form factor flip flop and how Apple touts it as "all new" each time. they throw in great features, then take them away, then reintroduce them and call it "all new". enough is enough
Apple needs to add features to the Nano - not take them away. Bluetooth was LONG overdue. hell, this thing should at least have Wifi for AirPlay, Wifi sync, etc.
the reason why we aren't seeing Nanos all over the place is b/c the people around us who would have bought a Nano most likely spent the extra $50 and bought an actual $199 iPhone 16GB (subsidized price) where they can use iTunes Match and stream all 80GB+ of their music at their finger tips without the need to store anything locally. this is the same reason i don't see the iPod Touch anywhere either. the Nano has lost its purpose with the exception of people who use it to work out (i do), or 12 yr olds. but even 12 yr olds are getting iPhones.
Apple is smart - they are doing this on purpose. the margins on iPods are pitiful compared to the all-mighty iPhone. if they could dissolve their entire iPod line in exchange for everyone owning an iPhone they would do it.
for the sake of keeping the Nano innovative, it should at least have wifi and the ability to output via AirPlay and also stream from iTunes Match. the iPod Nano would work great to double as a home music remote. also bring back the camera and video camera, which would sync to a Macbook or Windows PC via Photo Stream when on wifi. these are all minor modifications that can still maintain the thin profile, albeit it would need to be a bit longer device than the current 7th gen. i'm OK with that though