SanDisk announced that they will start to sell full albums on microSD cards. There's a lot of talk as to whether or not this will actually take off, but at least someone's thinking about way to try and evolve the model. I think more interesting is the agreement that they have to distribute not just MP3's, but at a higher bitrate (320kbps) than what I've seen commonly available.
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+ bob
That said, I do like the rewritable card based music player idea. I just bought a Soundfly MP3 player for my car. It plugs into the cigarette lighter, reads MP3s off of USB flash sticks, and broadcasts via FM to my radio. It works perfectly and I love it that there are no wires or cables or messy tape adapters. I love being able to physically organize my music on individual flash drives that I can put in my pocket.