Although recent iPods will play video, their screens are tiny and the format support is extremely restricted. The 30GB Archos 404 isn't quite as small, but it's around the same price and plays a heck of a lot more. Oh, and it's got a built-in 'camcorder'...
This multimedia player boasts no less than 30GB of storage (up to 80 hours of video, or 15,000 'average' songs) and, depending on how you've configured it, will support Microsoft's 'PlaysForSure' or an external hard disk mode.
The latter is preferable, not least because it's the only way you can get DiVX files into the unit (and, for that matter, 'camcordings'). The quality of DivX and XviD replay can be superb, depending on the source quality. Interestingly, the player will also display PDF documents and JPEG stills.
The Archos 404 is a great little device that's certainly more convenient than a portable DVD player - and better for video than an iPod.