I picked up a 5.5 gen Ipod Video - 60gig on ebay for like $160 shipped. got it from the "ipod_outlet" - supposedly a store return. the thing looks brand new. (better than my classic, which has never left its case....) I rockboxed it, and it plays FLACs. I had to fool around the the rockbox "themes" to get it looking right (large font for my failing eyes, displays "album art" - really just live pictures of the artists I've selected)
definitely a viable solution. plus you get to hack stuff....