The lack of a screen saves cost, size, weight. It's not a gimmick, and Apple doesn't pretend it's better than having a screen. They do claim, rightly, that it's a highly usable product without one. (And a product in the same price range and similar size to thumbdrives that are NOT music players.)
I personally demand a screen, even though I seldom look at it and always use shuffle mode anyway. But then, I wasn't shopping for sub-$150 players, and didn't need the ultimate in light weight. In addition, a really SMALL screen is not as usable as an iPod/iPod Mini. It could be done right, maybe, but it wouldn't be the same.
I'm sure flash iPods will move up the line as prices fall, but I'd expect them to put 2 GB flash into an iPod Mini if anything, not into a Shuffle.
It would also surprise me if Apple produced YAFF (yet another form factor) in between the Shuffle and the Mini. I'd expect them to use those existing product lines.
For instance, maybe a thinner version of the Mini--or at least lighter. (And ideally, the last one without a color screen
)
I also agree that the rumored pricing is too optimistic. Apple doesn't need to undercut the average player price by THAT much.