I have a palm lifedrive, which is similar to the tx, except that it has a 4GB HD, faster processor and larger battery. They run the save version of palm os and have the same applications bundled, more or less. I'll take on these questions one at a time.

1. ptunes [pocket tunes] works pretty well, supports playing ogg, wav, mp3 and internet radio [streaming mpeg]. It's a pretty nice program, BUT, audio playback gets pretty horribly messed up if you
try to run it in the background and do any other kind of IO with another app. The 770 demo video show the 770 player working well, even while running other apps simultaneously.

2. A palm TX can browse the web. Blazer is a really annoying browser. It can reformat a page for the small display, or let you pan around a full size page. Blazer's network cache is pretty awful - you have to reload content just going back to the previous page.
It's also pretty slow. Opera and the bigger screen should make for a bunch nicer browsing experience.

3. The TX has several movie players available, including a free one which is pretty good, TCPMP, but still not up to a portable media players standards. The palm does OK in this area. Playing off a card works fine. Since I don't have a 770, yet, all I can do is say that the palm video software seems to work ok.

The TX is a nice PDA, much smaller than my lifedrive, but they had to slow the CPU down a lot to compensate for WIFI use with a smaller battery. I've read that it's not too noticable, but I'd expect that video playback will be affected at least a little bit. I should also point out that if the sensitivity of the TX'es wifi radio isn't better than on my lifedrive, you may be disappointed.

There may be some overlap in functionality, but I really don't see these devices as direct competitors, any more so than I think it makes sense to compare a TX to a PSP. I don't see myself getting rid of my lifedrive when the 770 shows up, especially since it should make a fine self powered 4GB usb hard drive for the 770. :-)

I plan to do a lot of business related hacking on this device, so the money really isn't an issue. Pretending for a moment that I was just a regular user buying one for pleasure, than the question of wether it is worth the extra $70 USD really depends on how much and how often you plan to use the 770 for it's intended purpose. Palm accessories are often quite expensive, so you may find that total cost of ownership is actually about equal.