I agree that a relatively simple, relatively low-priced media player with great build quality would have a market - but Apple would be cannibalising it's 'fitness-oriented' market if they allowed both the Shuffle and the Watch to exist.
Until then, if you want to use it as an 'iPod', it's just another expense on top of the iPhone you already have that's your 'iPod'.
Apple cancelling the iPod line completely is frankly dumb. I know at least a dozen parents who use these for their kids.
Also, what's with all the people suggesting parents just buy an iPhone with no sim? Y'all realize that the cheapest iPhone is twice as much as the $199 iPod Touch? :/
Especially if you're on Wi-Fi and I believe on cellular (we still don't have it here in 3rd world) you can just go hiking with the watch and stream your music on Bluetooth without phone.
Same for messaging, fitness tracking, and voice calls. I think it's enough for that device.
Just to highlight this point, an iPhone is required for activation. You can't activate with any other Apple device. You can use a family member's iPhone.