The only way Zune will sell at the moment is the fact at first glance it has more stuff than the current model iPod.
Just imagine in a department store:
Customer " I want to buy an MP3 player"
Rep " Yes - here we have an iPod and here we have a new product from MICROSOFT called the Zune"
Customer " what's the difference between them?"
Rep " The zune has everything the iPod has etc but it has more stuff too like........"
Customer " How much is it?"
Rep " Same as an iPod".
You keep saying the Zune offers "more" than the iPod but you're overlooking the last part of that conversation:
Customer: "Cool, so what games can you get for the Zune?"
Rep: "Oh, it doesn't do games like the iPod."
Customer: "I can put my address book and calendar on it though, right?"
Rep: "Ummm, no. It can't do that either."
Customer: "Notes?"
Rep: "Nope"
Customer: "I can at least use the Zune as a portable drive to transfer files?!?"
Rep: "That would also be a no."
Customer: "Well, how much does a song cost from the online store?"
Rep: "79 points."
Customer: "Points?"
Rep: "You buy a block of 400 points for $5 and they deduct 79 from that for each song you buy."
Customer: "But what happens if I don't use all my points?"
Rep: "Microsoft gets your money"
Customer: "Not if I buy an iPod they don't."
I really don't feel the Zune is the feature winner against the iPod. Yea, some may be swayed by the bigger screen but the whole point thing is going to be a Zune-killer.