Disclaimer: I am a proud iPod owner who purchased a 5 gig iPod when they first came out. I also worked for a subscription-based service, much like Napster.com.
I am not optimistic about the new Napster-To-Go service. I think its a neat idea, but I do not imagine it will be successful enough to erode the market share of the iPod.
One of the biggest problems confronting the service is their poor advertising which highlights the perceived savings of renting music versus purchasing songs a la carte. The biggest problem with this is since the original Napster the perceived cost of music has essentially been reduced to almost zero in most people's mind. While the iTunes digital music store is popular, it's still used by a relatively small percentage of iPod owners. Since most music fans already own a lot of CD's (or can use their friend's mp3 libraries), the cost 'savings' of Napster-To-Go is questionable.
Perhaps a more successful marketing campaign for Napster would emphasize the initial hassle involved with the iPod. When I first got my iPod, i spent a great deal of time sitting in front of my computer ripping CD's. While iTunes is an elegant piece of software, it was still tedious to repeat ad-infinitum. The existence of companies like Rip Digital exist means that there is an actual hurdle that must be overcome with the iPod.
The Napster-To-Go add would be much more effective if they showed an excited music fan gleefully opening up an iPod and then realizing that she has 8 hours of ripping CDs to look forward to.
If they want to familiarize people with the concept of renting your music collection, Napster-To-Go might want to consider comparing themselves to satellite radio. The two systems are pretty similar. You have to buy hardware and pay a subscription fee to get things to actually work. Napster-To-Go might want to create ads where they compare themselves to satellite radio, except instead of DJ's picking music, you do. Comparing themselves fee-wise with satellite radio may be an easier sell of their business model.