The 1.0.2 update improves menu navigation and the speed at which Cover Flow's album artwork draws.
The update also fixes both the iPod nano and iPod classic's Video Out option. Prior to the update, this option simply appeared to be disabled (greyed out).
Component video output
This is because the new iPods now use a new connector with component video output, giving you much better picture quality.
The 1.0.2 update is available via Apple's iTunes software.