At the World Famous CES Consumer Electronics Show in Las Vegas H20 Audio had one of their units dunked in water and playing away. The cases are not really out of line either, for instance you can get a waterproof iPod Shuffle case for only forty bucks. The iPod Nano, which should be cheaper because it is smaller costs eighty dollars and if you get a new video iPod the case is ninety smackeroos.
The new and improved tight seals are able to hold up under water pressure of ten feet or more and you can also get a dive case which can go down some three-hundred feet below sea level, which only costs one-hundred dollars. You need this in 2006.
http://www.ipodresourcecenter.com/Water_Proof_iPod_Now_Available.html