MacRumors published some details of the video iPod from a recent patent application from Apple:
The name of the patent application is "Electronic Device Having Display and Surrounding Touch Sensitive Bezel for User Interface and Control". The patent describes and depicts a full-screen touch sensitive iPod very similar to the various Video iPod Mockups that have been floating around the web. The application was filed in June of 2006.
The focus of the patent is the incorporation of a touch-sensitive bezel (edge of screen) that can adapt to the screen contents to provide an input method for the user. Hrmpf suggests that the use of this non-screen area would eliminate many of the "smudge" and "scratch" concerns for a full-screen touch iPod.