I'm not trying to take any side myself here, but it does sound like you're implying that it's the "audiophiles" versus the "mindless masses", when I think you'll find there is also a significant population of people who value good quality sound but who can't necessarily discern any difference in quality between the top brands of mp3 player. I've owned models from three of them, and I certainly can't.
This being said, I have an iAudio and, using the same headphones, the sound is noticeably better than my girlfriend's (more expensive) iPod.
Since the previous comment didn't just talk about mp3s in general but specifically mentioned 210Kbps VBR I think you'll find it an eye opening experience.
What is a blind ABX test? http://www.hydrogenaudio.org/forums/index.php?showtopic=1629...
(I've only seen one PS3 game I've wanted to play that wasn't also on 360.)
Sure, Sony's backwards approach meant that companies like SanDisk were able to get ahead of them, but their devices just don't have the interface that Apple's iPod has. And Sony has been really old-fashioned in their approach to their devices recently. Where Apple has used new technology to create better interfaces, Sony just hasn't kept up.
The issue today is that no one (except possibly Palm with its soon to be released webOS) has been able to match Apple's interfaces, never mind exceed them. And with Apple's volume, it's hard for a competitor with a poor interface to undercut Apple on price. So you get items like the Dell DJ which costs the same, but isn't as well designed.
For Sony to regain its position in portable electronics, it really needs to figure out the interface that will make people's lives better than Apple's (or at least just as good). Palm might be doing that by equaling Apple's touchscreen design and going a little further with its "cards" metaphor, but that's a bit of hopeful thinking on my part (as much as I like Apple, I like competitive markets even better).