If its refurbished by Apple or an Apple Authorised Reseller, i'm sure that it's nearly new condition. Apple usually lowers the prices on these as most people don't feel comfortable owning an iPod whose earbuds have been stuffed into strangers' ears or used by an unknown person of varying hygenical standards. But Apple usually takes the entire thing apart and fixes any problems, wipes the drive and throughly sterilizes and cleans its stuff, but I'm not so sure about non-Apple companies. I would warn you that Apple or its Resellers/Affiliates do NOT fix the superficial damages, such as blemishes, oxidations, or scratches, so if you're really touchy about scratches, I suggest you buy a brand-new Nano instead. But if these things don't bother you, go ahead, but if I were you, I wouldn't trust non-Apple companies.
BTW: davewnyc, Apple usually replaces the batteries and checks all the electrics. And yes, the Apple warranty still stands IF you buy it from an Apple Authorised Reseller.