I keep everything in FLAC format, but I also have a script that creates a parallel directory with all of my music encoded as variable bit-rate MP3 files. Those are what I copy to my MP3 player for listening on the train.
I never could get in to watching video on a portable device. If it's small enough to carry around, then the screen is too small to watch anything worthwhile.
I've tried using my phone as a music player, but I've never found a phone with decent audio quality and a feature set that I could live with.
If you want to use your phone as a music player on a plane, be sure you can set it to "airplane mode" and turn off the networking.
I have an iPod Nano 8GB, and find that it's a good size for carrying around. It's small enough that I don't mind carrying it in addition to my phone. It actually fits in the case that I use to carry my headphones, so really there's no size penalty. I find that 8GB is large enough for a decent variety of music. 16GB would be even better, but 4GB is not enough. Unfortunately, I find that the sound quality on the latest Nano is inferior to some of the older iPods, so I'm thinking of replacing it, but I haven't found anything suitable yet.
-Rob