Sorry to break it to you, but some people don't really have any use for the features of an mp4 player and are quite satisfied with an mp3 player. It's like comparing an average family sedan to a BMW. Sure the BMW has a lot of shiny new features, etc. But most feel that a family sedan is more than atequate for what it does, listen to music. I'm sure many will disagree but I don't find that much use in watching videos on tiny 1.5" screens (yes I'm aware there's mp4 players with 3, 4.3 and even 7" screens).
But if I truely wanted to watch a movie, I'd prefer to watch it in my lounge room with widescreen hd lcd + 5.1 surround sound. Living without movies and videos 24/7 isn't really a big issue for me anyway. This is just my opinion. oh btw did I mention how much more mp4 players cost compared to mp3 players? There's a market for both players IMO and you shouldn't really compare the two.
edit: Also for exercising, ie. jogging, you tend to want to carry as least weight as possible and it's not like you're going to be jogging and watching a video at the same time!
re-edit: Actually most products, whether MP3 or MP4 players use USB 2.0. Although your post is extremely well written, I believe you could have chosen a much better topic to write about.
The newer MP3 players (well most) tend to have a small 1.1" screen, even better they're OLED instead of LCD which tend to use less battery. The size differences are EXTREMELY DIFFERENT. For example compare the Teclast X19, AOC V9, Onda VX515 and VX898+ which are the newer generation of MP3 players. They are very small in form and weigh a fraction of most MP4 players (see the chuwi 7" player). Did I mention that these new MP3 players have battery life that ranges from 70hours nonstop mp3 (on a specific song/settings/screen off) and even 90 hours.