I still own my iPod Classic Nano from 2007 and I still use it. Before I owned my car, I'd use it to listen to music when driving my bike. Now I still use it when I go running. The storage was huge back when I bought it, but now those 4 GB give me trouble whenever I want to add music - I always have to delete. But still, it's enough space for its purposes.
I like using my iPod for music since it means I can keep more space on my iPhone free for pictures and apps and such. Besides, the armband I use for my iPhone when I go running doesn't have an opening for my headphones to connect to my iPhone anyway.