I just bought an iRiver H340 on eBay for just over £200. It has a built in mike, but also a mic socket as well as USB and line in and out. It has a 40 mb hard disk, and will hold hundreds of CDs in mp3 format. It's about the size of a packet of fags. You can also store digital pictures or any other computer file on it. It's a perfect bit of kit - far superior to the iPod.
Cheers
Ray