I'm not sure what the big deal about size is, if small is important there are plenty of good flash memory based players. Maybe there will be a flash zune.
I agree. If its portable music and only portable music that you want, there are plenty of small players out there. But if its portable video that you want as well, then the size of the player obviously has to increase in relation to the size of the screen. Unless you want to be watching video on a 1" inch screen, which is ridiculous in my opinion. Maybe in coming years there will be a portable video player developed that is very small but incorporates a small projector so that the video can be watched at a viewable size on any flat surface like a wall or a binder.
The Zune isn't even that much bigger than the iPod. Its almost exactly the same weight, its slightly taller because of the larger screen, and slightly thicker because of the Wi-Fi module. No big deal in my opinion.