1. I have about 10,000 songs, 37 GB in iTunes (I actually do own all of those CDs, no illegal downloading for me. Well maybe for the occasional B side or live preformance). My iPod has been filled to the gills since the first day I've had it. It would be nice if I had room for everything but iTunes makes it pretty easy for me to switch things off and on. And do I really need to carry more then 3700 songs with me at any given time??
Navigation is simple. The scroll wheel is very intuitive and you can go through the songs as fast or slow as you like. You can scroll to the end of a 4,000 song list in 2-3 seconds if you like or can go a lot slower if you need to. It is difficult to describe but once you get the hang of how the scrolling works, you can find something in a long list pretty easily. You can also scroll through Artists (then the artists albums, which play in order), Album titles, songs or generes so yes, finding music on the actual deivce is quick and simple.
2. I have not used the new generation of iPods but I do know quite a bit about them. Physically it is the same, except for the click wheel that the iPod mini has is part of the new generation. Some thinks it makes the iPod look ugly but it is generally accepted to be a better way to use the iPod. My version has the touch senstive buttons which some people didn't like because the claimed they are too sensitive but I never really had a problem with them. They are, however, totally silent when the click wheel isn't and invlove no moving parts, so a button can never break or dust can't ever get into the unit. For example, if I had my iPod out in the rain, I wouldn't really be too concerned if it got a little wet but it is possible for water to get into the newer ones. Overall though, I would say the new iPod click wheel is probably a bit better.
The biggest improvement is the improved battery life. The old ones are rated at 8 hours but this is under optimal conditions. You can realistically expect 4-6 probably if you change songs and use the backlight. This is a problem for many, but not for me really because I don't ever use it for more then a few hours away from a charger. The new one is rated at 12 hours and from what I hear, you can expect to get 10-12 hours with normal use.
The new ones also have upgraded firmware, nothing real major though. Just some increased playlist support and things like that.
So the difference isn't really that great. The new ones are probably better but at the right price, you can't go wrong with the old ones. I myself am waiting for a 60 GB or larger iPod that I speculate will come out someday before I upgrade. And when I do, I will probably keep the 15 gig I have now anyway.