True, but some people are just out of luck if they can't afford an iPod - you can't please everyone, and you'll never succeed if you try. What's next then, the hobo on the street who could only afford a $10 iPod? Better give him one too Apple, go on, address that need and that market niche! I realize there market for these people who can't quite afford an iPod is larger of course, but you see my point. There are lots of people who would "want to be cool" and would love it if Ferrari made a lower end $20,000 model to address that market niche, but it ain't gonna happen.
If Apple does indeed release a lower-end flash-based player, it won't be "just cuz people want them" - there are lots of things people want - it'll be for a number of right reasons, otherwise it won't happen.