My 10 year old inherited mine since she uses it more that I do. I have turned off you-tube and the internet, but it still works for her games and she can do free texting with her friends who also have the same app. I have loaded some free audiobooks from Librivox.org onto it and she listens to it at bedtime on her small speakers by the bed (not headphones, as I want to make sure that's all she's listening too and not playing games at bedtime!). The movies and games have been very useful when waiting endlessly at urgent care, the medical lab, and other such places where they are not feeling up to coloring or playing, but can sit and forget about how crummy they feel while waiting. My 10yo uses her allowance (which is not much) to buy music she's into, like Owl City.
My 7yo has also inherited an older model ipod nano that she has a ton of stories loaded onto. You know, you can copy the files off audio CD's from the library right into itunes? She has a lot of those read along stories loaded. I just loaded Harry Potter recently, and one of the Naria books. She's listening to Heidi right now from the Librivox website.
I guess it's all in how you use it. I had it first and used the free Skype to call my dh from college (with wi fi) before I got a cell phone. I also used the texting and internet search features, also free with wifi access.