The newer iPod Nanos apparently plays videos. (3rd and 4th generation)
Right now it's on sale at Amazon.com for $130.
3rd generation
http://www.amazon.com/Apple-iPod-nano-Silver-Generation/dp/B000JO1MU4/ref=pe_28260_10803180_as_img_4/
Quote:
Movies
Buy movies from the iTunes Store and you can sync them to your iPod nano to watch anywhere, anytime. Up to 5 hours of video playback means you can watch two movies back to back. And for your viewing pleasure, the 320-by-240-pixel display--with a whopping 204 pixels per inch--is 65 percent brighter than before.
TV Shows
There's always something good on iPod nano. Browse thousands of episodes of your favorite TV shows on the iTunes Store, buy them for just $1.99 each, then sync them to your iPod nano. Watch last night's episodes this morning, or buy a whole TV series and play a pocket-size marathon.
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4th generation
http://www.amazon.com/Apple-iPod-nano-Black-Generation/dp/B001FA1NCI/ref=pe_28260_10803180_as_img_8/
$135
Or, you could go for the BIG iPod that's full size, and has 120Gb of storage for $225
http://www.amazon.com/Apple-iPod-classic-Black-Generation/dp/B001F7AHXM/ref=pe_28260_10803180_as_img_12/
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