Yesterday I played with a colleague's Rio (a solid state portable MP3 player). In a word, nifty! Even though there's too little memory (30 minutes at the "high quality" compression rate) and it doesn't record, this is clearly the way portable music will go. Solid state audio's case is compelling: no mechanics! No optics, lasers, motors, sleds, or heads. The only inherent size limit has to do with the battery. (My son has a Radio Shack watch with built-in AM/FM radio that you listen to via its headphone jack. I think we'll see solid state players like this within a few years.) [In fact they're already here, Casio has a WMP-1V MP3 wristwatch due out in April 2000. -eaw]
MD today is still the winner, due to its maturity, but I tried to figure out when solid state audio would overtake it. Doing a little searching on the net, I found that DRAM and FLASH RAM apparently follow Moore's law (a doubling in capacity every 18 months). At that rate, MP3 players available for Christmas 2001 will store 4 x 30 minutes, or two hours. This is still not quite enough for me (two hours of MD music plus a player is a pretty small package), but wait 3 more years and for Christmas 2004 you'll be able to get a player with 8 hours capacity (16 hours at "mid quality" compression rates). Now this is enough for most folks' on the go use: you fuel it up once a week or so and it lives, hassle free, in a hip pocket (or watch!). I really think it will be a hard package to beat.
It can't be too hard to extend the players by adding some DSP power and an ADC to give wonderfully robust little recorders (with selectable compression rates!). Bring the audio material back and store it permanently on your home server. Put a USB port on the side and it couples easily to all your digital appliances.
If Moore's law stays true to its course, I posit the end of MD's upward ramp to be around 2005 (with perhaps a few added years to account for market momentum).