dl the trial version of clonedvdmobile and you can see all the different players it can encode video to. then choose one of those deceives. it will make you life easier.
i would just buy the ipod, its number one for a reason. You don't have to buy movies off the itunes store. Just use handbrake or clonedvdmobile.
but, if you want to play games check out a psp.