Problems:
--Dependence on an internet connection. Deal breaker right there. Subways? Forget it.
--Buffer times
--Connection instability/loss
--Already way overstrained data networks contributing to the above
--Battery life will suffer if it's wifi
--And if it's 3G, well there's another bill in the mail every month. A recurring bill in the form of data charges to listen to my music I already paid for? No thank you. No, no, no thank you.
Since when did every device in the house need a monthly bill to go with it? AT&T provides a pretty crappy service as it is to begin with, why shuffle any more money right into their pockets?
Dependence on an internet connection and a bill in the mail are enormous deal breakers.
To the people saying "Oh, well Apple isn't taking your hard drive away", no, they aren't, but this is the first step. In 20 years hard drives will be obsolete, as everything will be cloud based, and you'll be forced into the cloud whether you want to be or not.
This service is a completely stupid idea for anyone who has an iPod with a big enough hard drive to store their stuff. I can see the appeal for those with more than 160 GB of music, but other than those people, I see literally zero benefits to be had by this, and a slew of problems/frustrations to be gained.