Thanks to the advice of others here, I love my iAudio M3. Latest and greatest in the iAudio line is the M5 (audio only) or X5 (audio & video). Both support FLAC playback, but dunno about gapless.
FWIW, I find I don't need absolute best quality source files in my portable playback, i.e. original FLACs. There are already plenty of compromises in my portable listening - the headphone amp on nearly every portable playback device (within a reasonable price range, anyway), the earphones I use (Etymotic ER-6), the environments in which I listen (on the plane, train, etc.) - that prevent me from experiencing and enjoying the full fidelity of the original FLAC source. So I've found a high bit-rate MP3 or OGG file works just as well to my ears. While not my intent behind going with high bit-rate lossy derivatives, the side effect, of course, is that I can also fit more music on my portable player.