The next logical step--an iOS nano—would be pretty neat! I surely don’t need one, but it would be a pretty neat mini game system.
I'm not so sure of that. At a certain point the iPods are going to need to merge again, or at least the nano into the ipod touch.
Right now there are 3 "iPod" lines when there really should be 2.
The Nano and the Shuffle need to get blended, small size, small screen, with physical or (dare I wish for) electrostatic haptic buttons. For example if the iPod "watch" Nano had buttons on the side for play/back/forward/shuffle or some from of haptics for non-look use, it could easily bump the Shuffle off.
The problem is Apple's got a lot of old harware and very strange price points floating around it is line-up that really needs some bulldozer redo, even at the cost of a profit margin hit.
• The Shuffle is out of date and over priced.
• The Nano is becoming more and more of a joke that isn't very funny. Partly because it isn't iOS-ified.
• The iPod Touch remains the name to beat for a non-smartphone PDA/Media-player. The Galaxy Player 5 is close IMO at $219, but once you throw in even a heavly discounted 32 GB micro SD card you're coming close to iPod Touch 5's price point. If Apple dropped the prices on iPod Touches by $50 dollars across the range it would further cement its place and leave 0 breathing room.
• iPad Mini (Hypothetical) is where things will get even screwier. As we don't know the hardware or price point yet it's tough to guess how disruptive it'll be. However at 7+ inches it will not be "pocket" portable the way the iPods are, which is the iPod Touch's selling point over a tablet or even something sized like the Galaxy Player. However for as a "home" device I could see an iPad Mini taking the place of some "family" iPods. Assuming it's a lower quality 249 or 299 device. If it's 399... I don't know what magic dust Apple will pull to make that viable.
Basically what I'm saying is that there needs to be some blood mixing here in the product lines.
The iPod Touch is just a tad too expensive however it doesn't have the room to move down the price scale with the Nano still hanging to life.
The Nano is sitting in a spot that is awkward, being almost to pricey for not being able to run Apps. However it's not quite as big as a Touch and so fits much better as portable music player (and I guess video... again... for this model

).
The Shuffle... Apple's last music player with buttons you can use without really looking. It's only advantage is partial voice commands that kinda work, that and being able to play Apple protected AudioBooks (which are basically Audible at this point so why get them in iTunes and be locked in?). Other wise it has none. You can find MP3/MP4 music players for half the price or less with twice the memory, and that have little screens that will actually show you what you're listing to.
The hold up are buttons. Without some way to Play/Pause & Skip Foward/Back the Nano can't take the Shuffles place. I'd actually agree that iPod Nano 4th/5th gen (click-wheels with screens) need to make a comeback in Place of the Shuffle. Maybe ditch the Clip and the Camera on the 5th gen nano. However, IF Apple somehow got electrostatic haptics into a 6th gen Nano (the watch) that could a better option to combine the roles of both Nano and Shuffle.
A $59 or $79, 8 or 16 GB, iPod Nano 6th gen with an electrostatic haptic interface for "virtual" buttons. Would allow the iPod Touches to slide down to 149 (16)/249 (32)/349 (64) and take over the 'Nano with a screen' roll that people want with iOS-iffed music/media players. Perhaps even use Bluetooth 4.0 to allow the Nanos to link to devices with WiFi/Internet and pull iCloud music over.
*edit*
Which would leave room for iPad Minis running from 299 up and iPads starting at 499.