I'm glad someone is trying to compete with the iPod touch. The OLED screen, "HD" radio and 720p output are all neat features. There's also apparently a big update coming in November for the 360 and Zune HD that will allow integration between the two.
It is a little ironic that the Apple TV can't do 720p playback at 30 FPS and the Zune HD can. Heh.
"H.264 video3; Baseline Profile + bframes, up to 10 Mbps peak video bit rate; 720 pixels x 480 pixels up to 30 frames per second (or 720 pixels x 576 pixels up to 25 frames per second);1280 pixels x 720 pixels up to 30 frames per second, up to level 3.1 and 14.0 Mbps peak video bitrate; Zune software will transcode HD WMV files above the stated capabilities at device sync
DVR-MS4; Zune software will transcode at time of sync"
The whole "We're not going to have an App Store competitor until Windows Mobile 7 comes out" is kind of weird. And the fact that the Zune HD's browser is based on Internet Explorer 6 (quite possibly the worst version ever of IE) is also a downer.
However, Zune HD looks to be a decent competitor if you want something other than iPod touch.
http://www.businessinsider.com/zune-hd-app-store-2009-9