first thing first ....... for a portable storage device , it shud have the convinience of being recognized as a removable drive in windows cos its bloody hell irritating to install the software each time ur on some other machine .
Secondly , if considering music ....am sure u will hardly fill up 4Gb space , besides you always have the option of swapping music with the PC .
So I go with Switch's opinion . Get a lower costing , lower capacity Mp3 player and invest on a lappie HDD with casing . Trust me it wud be money well spent .
Infact you cud get the ipod nano and get a FM transmitter ( Make sure u get a FM transmitter with the whole frequency spectrum and not just the option to tune it to 4 preset frequencies cos if in future or even now if the radio stations are in close frequency or even worse on the same frequency then there will be a lot of mixing and superimposing of signals and will create a big mess .
So this is what i suggest :
Option one : 1) Ipod Nano + FM transmitter + portable HDD : 11+2+3.3= 16~17k
Second option and my favourable option :
Get the IRiver H320. Its a 20 giger . Its recongnized as a removable storage device , so no need to install s/w for porting files , which in my opinion is a must for true portability . Its a very superior player audio quality wise and feature wise . Its got line out , which is a very essential feature , try connecting the ipod with its audio jack to the aux in of ur music system , STATIC is what u will get !

. Yea you can use the FM transmitter with the IRiver too and in this case with your music system ( since mostly all musis systems have FM ) , but nothing like connecting it directly to the aux in's of the music system , thatz optimal audio quality .
So here it is : 1) Iriver H320 ( 20 GB ) + FM transmitter : 300$+ 2k = 14
here u get 20 gig storage which is swappable to make ur playable&portable music exapand

and at the same time have a convinient storage device .
Only one gripe , it doesnt have on the fly playlist feature ! .