An interesting concept - the merging of the two "big daddies" of the iPod line - the iPod classic and the iPod touch.
It wouldn't work... first the OS can't run on something as slow as an iPod hard disk, second it would take too much power.
Wait a minute...aren't the HDDs used in the classic 4200rpm? And the MBA runs on a 4200rpm HDD. How are the HDDs too slow?
No, as SSD prices fall, probably by next year, you will see a 128gb iPod Touch and then they will drop the Classic.
haha the classic's is downclocked to more like 3000rpm, and the macbook air has a 1.6ghz processor with 2GB of RAM. The classic doesn't have to do all the fancy web browsing, animations, or dynamic imaging that the iPod touch has to do. Think of it logically!