I suspect that the classic has a loyal and devoted following (of which I would count myself a part). In any case, I have a classic (80GB) and use it regularly as I have a large music library. Moreover, I like the idea of having it all in one machine where I can access it easily. The classic also comes with a very impressive battery life, something which is much appreciated on long (and sometimes tedious) journeys.
Ever since I bought my first iPod in early 2006 (30GB) and, a few months later, when Apple immediately replaced it without seeking refuge in contractual small-print after the HD died, I have been a big fan of the iPods and of Apple; indeed, their customer support re iPods was one of the reasons I switched to Mac computers.
As it happens, I also have a iTouch (64GB) which is a superb machine, but it and the classic fulfill different needs. Sometimes, one simply needs a splendidly designed, but functional machine which allows one to listen to one's entire music collection for hours on end. The classic does this extremely well, and sometimes a design cannot be improved on by all that much. While the Touch also allows me to do this, the Classic doesn't do distractions, something for which I am sometimes grateful.
Of course, a large SSD drive (128? 256?) would improve the Classic, - indeed, both the Touch and the MBA (and I have both) benefit hugely from this technology - and perhaps, the aesthetics of the Classic could also be refined, but to add endless other technological "bells and whistles" to the Classic may be to miss the point of the device somewhat.
Cheers