Well, from an iPod point of view, it would be pretty useless adding just a USB connection, as then all you could do is charge it, but the OP said you could watch video on the seatbacks. The only way you could do that on an iPod is either a 3 pin 3.5mm lead, or the dock connector. the 3.5mm lead doesn't give you power, so I assume they are talking about the dock connector.

It isn't isolating consumers, it is just a marketing decision. It doesn't take anything away from people without an iPod (as it was never there), and I guess they are hoping that it would sway people to use their airline rather than another one, in that they can bring their own video.

The thing I do wonder, if they are allowing people to bring their own videos, how do they regulate what people are watching?
Can't see it going well when someone brings some hardcore porn on their player when the family on the next seats are on their way to disneyland!