OK, my toys arrived yesterday and I got it charged and playing later last night.
Setup is amazingly simple. It's like using a USB thumb drive, just plug it in and your PC sees it as a drive, no software needed.
There are some folders on there, one called 'Music' so I loaded song files and folders to it to see how the interface would work. The player recognized all my id tags and the flac's sounded great. I'm not sure how it chooses to go from one song to the next but there is a list, random play, and other playing methods that I'm still learning.
When I first started it, everything sounded like crap. The bass was 'expanded' the 'BBE' was on a high setting... etc. So, I turned off all that crap and things got much better... but it's still not as good as my normal 2-channel system for sheer realism. What? $25 headphones aren't as good as $1,k speakers with another $1,k in tweaks?
The Senn 202's have excellent isolation characteristics. I don't know how much but I could hear myself breathing, it cut my wife's TV blaring to less than half... If I played music at a light volume I could barely hear anything else, if I played at what I call a 'normal' level for me, I couldn't hear anything else.
I'm pretty sure the headphones need more breakin but I don't have many devices that have headphone outs.... so, I let the iAudio play all night at a good volume (a little louder than I'd like for 'normal' but not distorting). I couldn't get distortion, btw at any tolerable levels unless the music was crapily recorded in the first place. (Like David Bowie's 'Queen Bitch'.. great song but it gets a little screetchy on most systems) I adjusted the eq settings some more and this was even tolerable at high volumes.

Anyway, the bass was a little muddy at times but the midrange was very nice; Nick Drake sounded incredible. To me, this sounds like break-in issues... I'll find something to continue breaking in the phones.
The iAudio may not have died after playing last night, it may have decided to sleep after some point but I don't know. I forgot it has a power switch and I tried to revive it by just pushing 'play'. When it didn't, I put it on the charger. If it did, I'll be interested to see what the real life is today.
One thing I don't know is.... there is a thin 4-contact slot under the headphone jack. I'm wondering if this is a digital out. Do other countries use some other kind of headphone jack that looks like a small rectangular connector? I'll look in the manual after it charges. You can't charge and play at the same time, it's 2 different cables; even if you get the cradle you can only do one or the other. The device end of the cable looks exactly like my Palm Tungsten E's cable, BTW.
Overall, I'm quite pleased. The whole thing was about $275. That's not small change for a portable music player and headphones. However, I think it's a good way to take a little piece of 'audiophilism' with you.

-C