The price for this repair is clearly insane, but so too is believing that other major manufacturers are any different. I have had bad experiences with creative, sony and canon. I appreciate that the ipod is not to everyones taste, but at least try and put that issue aside when discussing the cost and quality of repairs.
Edit: Some repair info for comparison
1) Canon, 280 pounds to repair a 500 pound camcorder, which could then be purchased for 320 quid. 1year and 3 months old
2) Sony. Broken remote control. No obvious damage, just stopped working (no it was not the batteries). TV and remote cost 560 quid. Cost of replacement remote 110 pounds
3) Creative muvo thingy, the headphone socketcame loose, resulting in distorted or no sound. Cost of muvo 120, repair 70 + VAT quid. In the case the tech guy apologised and admitted that the cost was so high because they don't really want to do repairs!
"this item is under 5 years old you have every probability of a free repair or significant contribution towards replacement.
the onus is on the retailer who sold you the goods to sell you something of acceptable quality and durability."
This is very true, but forget it unless you wish to go to the small claims court. I know this from experience with cannon.