You should get at least 2 years out of the battery before you need a replacement. Free for the first year, $69 each after that (from Apple, some palces will do it cheaper). Because it uses flash memory, the battery life may hold even longer than 2 years on the Nano.
If you get a Nano, stick with the white so you don't have to see the scratch flaw. Also, invest in an Invisible Shield.
No it is not true that you have to send them back every so often. While the iPod uses an internal rechargeable battery that naturally degrades over time, it does not die so quickly with regular use.