There is a point without the lcd, though I agree an lcd remote that allowed you to control all menu functions of the iPod from a distance would be a fantastic.
You aren't restricted to small playlists, though. Playlists can be ANY length you want. You can even set the ipod to start shuffling the entire library and then it's just a matter of clicking through songs, pausing, unpausing from a distance.
So as I agree with you that the lcd is the coup de gra of what an iPod user would want, there is still a point to this one.
I guess it too comes down to ones listening habits. For me I just start playing a large number of tunes and shuffle, even when I had a five cd changer I had all of them to shuffle continuously. I pick a group of songs I want to listen to and shuffle and when I'm ready to change, I change. I know other people have distinctly different habits than me.
Cheers,
Stu