iQEM, I think that battery is for the 1st gen big iPods
You could route the battery on the outside, try to fix some small BGs at the spot where the battery was, and route the signal to the headphone out. This wouldn't increase the size by that much.
Jon, have you messed with your iPod mini yet? I might be able to buy one off my friend for dirt cheap since he has 5 iPods.