After musing with James Whelton about his iPod nano homescreen hack (http://nanohack.me/), I set out to see if there was anything interesting you could do to the iPod.
Discovered what may be DFU mode: hold down the restart buttons until you get a black screen (it reboots twice) and iTunes sees the device and alerts you.
Afterwards, modified iRecovery to work with the iPod nano (had to add its DFU/Recovery USB ID) and allow it send files, and tested with some files I had extracted from the iPod nano 6G firmware (using the extract2g tool somewhere from http://www.freemyipod.org/ ).
disk.fw and osos.fw work (one boots disk mode, the other boots to a homescreen). The other files make the nano boot to a white screen, but go no further.
So, basically, it seems we can send encrypted firmware files to the iPod, and have them execute, similar to what is used to jailbreak the iPhone. If the nano rejects the file (i.e. unsigned, invalid), it reboots.
While this by itself isn't that cool, hopefully the info will inspire someone else to finally hack this thing and give us custom 'apps'.
Make sure to click '720p' to see what's going on.