100% - the iPod wasn't just good enough, it was more than enough for almost everyone. The Zune was firmly in the diminishing returns category by the time it came out.

Yep. To overcome an incumbent that sells a very good product and has momentum, it is almost never enough to be somewhat better. You have to be "knock my socks off" better.

The Zune may have been somewhat better (until the nano and iphone), but it wasn't enough better to overcome the ecosystem switching costs.