Lets put it in proportion shall we ......
At the time the X5 was being worked on, and eventually released - 128Gb cards weren't out there. So max storage was 2 x 64Gb (128 gb). Allowing that Fiio were building this as a high-res player - their thinking would likely be that most people would be playing some sort of lossless. So average lossless (redbook) track at 25 Mb allows approx 5200 tracks. Many tracks will be much higher file size than this. So plenty of headroom (they thought).
When they discovered the limitation, they asked the engineers to fix it, and because of the limited on board/on chip memory, they at first couldn't fix it. Now they've come up with a solution - which is using the memory on-card to implement a fix (allow indexing). This has to be implemented - but we are promised that it is on the way.
Is this an epic fail - no - it's an error in judgement, and one Fiio will learn from for the future. Have they responded - yes - and in emphatic form. The fix (while not here yet) is on it's way - and if we look at how Fiio has responded so far (and the number of firmware updates to implement the fixes), I really take my hat off to them.
What I personally think is an epic fail is how a few individuals have had the gall to repeatedly shout in a couple of threads constantly deriding the player, and shouting their own petty demands as if they were the sponsors, and the only people that mattered.
For the record - I'm not a Fiio fanboi either. Their entry level products are good for people getting into audio - but after climbing the ladder a little - I can personally see the limitations of some of their offerings (E7, E9). They've had good value in the right price brackets though.
If I could send one message to Fiio now - it would be:
"Thanks James and Joe - thanks for listening to us, including us, and allowing us to shape your player. You're on the right track, and many of us don't mind waiting for the fixes, as we know you're still working on them. Thanks for making good sounding audio players affordable."