michaelleung: Unless Microsoft has given up on it, the Zune looked like a good piece of hardware. I know they have that Zune Pass thing (which basically means you must use the Zune software) which is sort of like added value, if added value meant actually paying $15 a month for music you don't own. The interface is extremely good, though.
I tried out Zune Pass, it's good, even if you don't have a Zune, the free 10 songs (no DRM) per month you get to keep forever make it really cheap. The XBox 360 integration is good, I was hoping for better Kinect controls, I suspect they'll be refined, just as the Last.fm Kinect integration has been.
I think the Zune is still a good player, in fact, it has apps, just like the iPod Touch (or whatever, the newest one is). I think their (disgustingly named) Squirt functionality would have been 1000 times cooler if they just said "screw it, we're just going to make the feature people want, not the stupid media moguls". I think if you're willing to buy a WP7 phone you may not need a Zune anymore, though. Perhaps an actual WP7 phone owner can clarify how much it's like a Zune, perhaps it's more like the Zune desktop software running on your phone, no idea.
I didn't muck with the Zune desktop software much during my trial, and I haven't used iTunes but once back when it was first launched, but by what I read I take it it's actually way better than iTunes these days.
Zunes don't fit the OP criteria for inexpensive though.