The real reason why Apple hasn't created a video iPod is a legal one, according to an analyst.
Jupiter Research analyst Michael Gartenberg explains that: "Unlike music, it's illegal to rip a DVD to your hard drive."
He writes in his Weblog: "No company wants to get into that legal issue with the studios and provide those tools. Not Apple. Not Microsoft. In fact, the reason MediaCenter Extenders won't stream DVDs from your MCE to the device is that in order to do so they need to be decrypted to send the stream. That's illegal too."
Gartenberg explains that the only sources of legal video content are recorded TV and home made movies, but, he notes: "There's a reason we call them consumers, as they consume content and not create it."
In conclusion he writes: "There's no market for the video iPod for Apple's customers at the moment. It's just not a good move for Apple without the sources of content they need. They will be there and we will get a video iPod one day. Just not this one."