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Cheaper legal options
Interesting, but I think some important considerations were missed.
The content capacities of mp3 players are not equal to their advertised size. For example, my 80GB iPod has a content capacity of 74GB. Assuming the same percentage loss across all iPods results in new sizes of 925Mb, 7.4GB, 148GB, and 14.8GB for the Shuffle, Nano, Classic and Touch.
Also, there are cheaper legal music options. Take, for example, emusic.com. I pay $10 a month for 40 songs, but consider the following subscription options:
Using your 5MB/song estimate and the reduced capacities I listed above, the cheaper option results in the following (much more reasonable) costs of filling the various players:
We also must consider the time over which this expense is spread. I began gathering my music collection when I was in middle school and joined two different CD clubs. By the time I got my first mp3 player about ten years later, I had accumulated over 500 (legitimate, not burned) CDs - and that's on a minor/student budget and taking two years off for a foreign mission. Again using your 5MB/song approximation, just the albums I already had were enough to fill 25GB of my 30GB (uh, I mean 27.75GB) player. If I had signed up for eMusic's largest service then I would have accumulated 72GB of music over the past four years - totaling nearly 100GB. Up until recently, there hasn't been an iPod that could handle a (completely legitimate) library of that size.
Looking at just music is too conservative, too, as many of the mp3 players, particularly the larger ones, hold much more than music. I have my contacts, calendars and many photos on mine, but the data type with the largest hard drive requirement is movies. If I put my (very small) DVD collection on there, it would cut my room for music (at least) in half - and I don't even use the video encoding resolution. Oh, and there are audiobooks and podcasts to consider, as well.
Beyond the larger media options, however, there is also the fact that iPods can be formatted to serve as external hard drives, holding all sorts of data. And we all know how easy it is to fill up a 160GB hard drive...
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