I don't know. I think the whole iPod line needs a make over. Kinda like what's going on with the MacBooks. What I would do:
iPod classic: Kill it like the pearly white MacBook.
iPod nano: This one would take the role of the big storage iPod. I would flip it back to a 5th Gen design again with the click wheel but with light cosmetic differences. Like an aluminum body so its aesthetics fit the iPod shuffle and the iPad and the Macs. It would come in 64GB and 128GB models (I'm not sure if flash storage can hold more than that.). Or heck even just a single model with 128GB. Slightly bigger screen, slightly better camera, better speakers, built in microphone, you know all the stuff while keeping iOS and apps out of it and keeping it at a decent price below that of an iPod touch. It's a music player not a mobile computer.
iPod shuffle: This one would take the role of the teeny tiny iPod for the gym and stuff like it is now. Storage bump to 4GB.
That's just my opinion though. But I really can't see myself buying an iPod classic when I could just buy a nano or a 64GB touch instead.
Agree 100% with what you wrote. I despise the current gen Nano and use my 2nd, 4 GB model strictly for music. Love the click wheel and would love to get a new one with 64 GB of storage.