I own a Shuffle and have used my friend's iPod Photo, and I do prefer the shuffle. While the Nano has the same "throw it in your pocket and forget about it" form factor, I prefer the durability and ease of use of my Shuffle. it would be nice to be able to rate songs and see titles, but aside from that and price I can't think how it could be improved. I see these rumours as a bit unsettling for that reason, but then again I can't see needing to replace my Shuffle any time soon so I guess I shouldn't care.
and for those who think durability isn't important: I've dropped my Shuffle on hard pavement around half a dozen times, with no appreciable damage to the finish. the thing is built like a tank, and sexy.