i have this
the device, as some have already indicated will play aac files with some tweaking.
However, the reason you buy this machine is for video playback while you;re on the move, as i often am - and for that, it's the best I've ever seen. The first video I played on it was a 1080p file of Quantum of solace - the video was more than just amazing - in fact I still have difficulty now describing how good it really is.
And yes - the sound quality is better than any MP3/MP4 player I have had in the past - and I had 4 different ones, including an ipod.