So I can drop avi's or mpg's or mp3's on it like a usb device?
Yes, if you have it set to function as a virtual harddrive, which can be set via the iTunes interface. It's also convenient to double as a usb keychain storage.
With the iTunes interface you can import whatever you want, provided they do not have DRM embedded in them. If they do have DRM embedded, then the file needs to be stripped with something like
http://www.tunebite.com, which works very, very well.
No service has the complete catalogs of artists... for example Geto Boys - Still (from Office Space, the printer beat down scene)... very, very difficult to find. Only remixed (badly) versions are available through iTunes or Napster... so it helps to keep your options open... and Tunebite does that perfectly for me.