I happily owned an H320 for three years, two of 'em with a crippled battery. I finally cashed it in @ BB (extended warranty), gave BB an additional $6.91 USD (not a typo

), and walked out with an 80GB iPod Classic. I was concerned about the lack of a custom EQ as well (which I used extensively on my iRiver) but have been more than pleasantly surprised at the 'pod's sound Q. The EQ presets (Bass Boost, etc.) are useless; I just use the "Flat" setting and the sound is right up there with the H320. It sounds great with Shure e2c canal 'phones, some higher quality Sennheisers, my car stereo, as well as my home hi-fi.
One thing I have noticed is there's no hiss with the 'pod, which is nice since Neil Young used reverb, not hissing.
While no audiophile (let's face it: no audiophile would use compressed files for playback), I am very picky. Had the 'pod not sounded and performed great, I would've immediately returned it to the store and gotten my $6.91 back. I can happily recommend it...unless you own a lot of 'pod-specific accessories for a prior gen. But that's another post....
Gapless is teh poo, BTW.
