After getting at least 5-10 iPods at work for various issues per day, I opted for a Zune after my good'ol generation 3 iPod finally met its last day.
In terms of navigation it's great. The iPod's heat touchpad beats it overall, but not by too much; very simple and easy to use.
Quality wise, it's better. The case is thicker, but if you take a look at the case you'll see there's a outer plastic lining protecting the Zune - something the iPods lost after they went to the colors and then to the videos, which helped (along with compacting the shit out of interior components) to lead to their duration in quality.
Freezing, which is something that still happens in the touch, let alone the videos (or 'classics' now) is minimal, if that, which is a definite benefit. The screen quality on the 3'' LCD is absolutely fantastic.
Audio quality, I'd say it's a hair better than the iPod or really anything else I've heard, but not something you'd consecutively notice on a day-to-day basis.
Battery life is a slight issue. If you turn off wireless (which you should because as much as Microsoft advertised the 'everyone can share songs!' feature, it rarely ever happens) and then dim the backlight and turn the amount of time the backlight stays on after an action, you can get decent battery life. I know I use mine on my 1,500 watt sound system in my car and I can get about 3 days use out of it with that and the gym runs.
The default headphones are shit though. Get rid of those. Overall, I'd say especially for the price go with it. The Zune program is nowhere near as good as iTunes is, but the product in itself, especially for this price, is a great way to go.