Certain focuses of the iPod are definitely becoming outdated, but the product as a whole I think has plenty of life left in it. From what i understand (and i haven't looked in quite some time), but the iPod Touch was the only competitive product with Nintendo's portable systems when it came to portable gaming. There's also the fact that these products are still, by far, the most attractive large music capacity devices on the market for the money.
I think we'll see some evolution with the iPod, but I think it'll be here for many more years.