Yes. Derive, if any, legal implications this may impose upon the developers from Irivers end. Are you guys sure that such engineering is even permitted by them ? I remember a group of guys a while back who were attempting such a feat with the firmware, and were quickly shot down by a cease and desist order from Irivers legal team. So I'd first try and find out whether or not joining such a truly worthy cause is worth the effort.
Developing a seperate application without the help of the original source code or any help from Iriver is of course possible, but when talking about reverse engineering, or using their code to build your own..that may be stepping into murky legal waters...I'm not saying I'm sure about that, just looking out for you guys.