Normally I wouldn't touch one of these third party players but this seems very good.
Curtis MPK8854 MP3 Player
Touch screen is 2.8".
Plays FLV & AVI.
Takes MicroSD, appears that it'll take 4GB and higher cards.
Has a nice loud speaker
For more infor have a look at the manual here:http://www.curtisint.com/html/custservice/manuals/CUR_MPK8854UK_EN.PDF
Seems like a nice alternative for someone who doesn't want to shell out loads of notes for an ipod touch.
Don't forget 3% quidco!