1. Yes. I normally play CDs and vinyl, but connect my iPod for parties and such, so that I can use custom playlists that I've defined for the event. I'm willing to give up a bit of sound quality in these situations.
2. No. I just have my music stored on a desktop PC. The thing that I haven't bothered to do, at least not yet, is to rip my vinyl, so that ALL my music is available to my iPod, and not just my CDs. The time involved to do this seems like a killer, though.
3. I agree that hard-drive based music storage is great. I love my iPod, but wish that it had more storage (mine is a 30 Gb) so that I could use a higher-quality format, or even a lossless format. I also think that if I am buying a song from iTunes, I ought to be able to get it at whatever bit rate and format I want. If I want to rip some of my CDs, or just favorite songs, at a more storage-intensive format for better sound quality, I am free to do so. I'd like the same choices with music purchased online.