Advantage of MD => longer battery life...
Advantage of iPod => you can use uncompressed WAV or AIFF files on them, and you'll get perfect CD quality and still fit more songs on the iPod. You don't have to buy any medias, authoring playlist is much faster (well, on the MD you'll have to record your own MD.. painful process). Over the long term you're saving a lot of money not having to buy more MD disks. Although at this point you probably have a lot of them anyway.
I haven't seen anyone with a side-by-side test of MD player output versus iPod's output with uncompressed WAV files. Although it's generally known that iPod's uncompressed file output is better than most portable CD players that's being sold today. (Well, in fact, probably better than *all* portable CD players short of legendary PCDP's).
I have compared a D-25s and iPod side-by-side.. when using uncompressed files, there's hardly any quality difference in the output.
Of course, uncompressed files will shorten the battery life further... it's a worthy trade-off depending on your listening habits. I'm never really 5 hours away from a power source of some sort.