That doesn't seem like a bad idea to me, either--I honestly think there's a market for ultra-compact, $50-ish MP3 players, although I don't think the tech is to the point where that's possible yet--no companies, let alone an Apple-quality product, are producing something anywhere near that price with specs far more reasonable.
What would be more realistic in a closer timeframe would be a budget iPod like the one mentioned on page 2. A 5GB iPod for, say, $150 or so seems like it'd sell well--I, for example, don't even have that much music, and there's no way I'm convincing my wife to spend $300 on any kind of portable player, but $150 is getting close to the range I'd seriously consider it. $100 would be the magic number, but the tech just isn't there yet.