i own one and im extremely satisfied...
yup, u can extend it upto 4GB or even 8GB[if u can find an 8GB card]. but will be available easily in near future.
btw, the sound is comparable to walkmans, but a bit low. but do use good earphones, as bundled one are crap.
u can use custom acoustics and increase the quality very much and it becomes even better than any walkmans or nokia/Samsung music phones.
i recommend peter's v2 acoustics from SE-NSE