I recently picked up 2 Iriver H140's from e-bay, since it is a discontinued product with high storage capacity, digital (optical) out, and will support FLAC if you switch from the Iriver firmware to Rockbox, which is free.
I could not be happier with the H140. I have one in reserve in case the first one breaks. I paid about $165 on e-bay for each-new. They retailed in the $400 range when still in production.
The H140 is not quite as "slick" as a 5th gen I-Pod, but it works, and it works well. With an optical connection to my MicroDac>MicroAmp, the sound is superb. It does not have a color LCD screen, and it is slightly larger and heavier than an I-Pod. However, the optical-out more than makes up for these minor issues. It sounds pretty good using IEM's just using the headphone out, without an amp (better than my Nano straight out of the headphone out without an amp).
To answer w&q's question, the difference between a line out and a digital (optical or coax) out is that the former simply bypasses the headphone jack; you are still relying on the internal DAC (digital to analog converter) to convert the digital signal to analog. If you have digital-out, you bypass the internal DAC and can send the pure digital signal to a superior, external DAC such as the Headroom MicroDac. You then send the signal from the external DAC to an external headphone amp (like the Headroom MicroAmp), and then to your headphones.
Thus, if you own a standalone DAC and AMP (or plan to get them), having a digital-out is a very good thing, and very hard to find in current portable players.
I highly reccomend the H-140; you simply cannot find a more versatile portable with this kind of storage capacity for this price. Just do a search on ebay for "h140" and you'll see a bunch of them; here's one that's about to be sold:
http://cgi.ebay.com/NEW-IRIVER-H140-...QQcmdZViewItem
You can also find H-120's on e-bay (20 gig capacity), but the price difference is not enough IMO to step down to 50% of the storage capacity you get from the H140.