Ok -- I think there are two thoughts here. One is saving $20. The other is a matter of Karma.
Firstly, what is this saving $20 theory that is going on here. No one's saving anything. The ZuneHD will be the same price as the iPod Touch. If the Touch goes up in price, so will the Zune. If it goes down, down goes Zune. MS is not making enough on these to try and undercut Apple by $20 so stop dreaming.
Now on to Karma. Screw Karma. Competition should dictate anything that can't be protected in court. If Apple can't win a court case over a patent, then Microsoft (and Palm) and anyone else should be able to do whatever, I think, in order to stay competitive. However, I say, be inventive while your using the IP. Now, if Apple CAN protect itself in court, it should be able to sue Ballmer's and Rubenstein's balls off.
I think most people would save $20 if they were buying the same exact thing. Sure, if it was just as convenient. Sometimes convenience is worth $20. But this is a (very very) stupid hypothetical question. Who's making this EXACT REPLICA? Some company in Southeast Asia? How do you KNOW it's an EXACT REPLICA? I sure as hell wouldn't buy it. When it crapped the bed, Apple wouldn't fix it. The parts are compromised in order to sell it cheaper. The $20 is not worth the worry.
Now if you're comparing ZuneHD and the iPod Touch, we'll have to wait and see, 'cause the thing ain't released yet and the updated Touch is not out yet. Also, we don't know if Apple will file suit on MS and Palm. That's still quite possible. Also, the ZuneHD won't be able to "does everything it does" or the same way. It doesn't have the App store and it ain't Apple. I think the Palm Pre stands a better chance of being decent competition for the iPhone before I'd believe the Zune's going to give the Touch any grief. And only because Palm has ex-Apple hardware guru, Jon Rubenstein. What does MS got?