Interesting video. I am also not leaning towards this being fake as well. We all know about the prototype they showed but it looked different than this.
The MP3 player is essentially a large VMU as you can see. It looks like it would connect to the DC through a controller port and you could download songs form the internet. It was never mentioned if this could connect to PC for downloading music but one would assume it would.
No specific technical information was ever released, only that it would be high capacity, connect to the DC (didn't see that one coming) and come with a pair of headphones. It was assumed that it would come in different colours but this was never confirmed or denied by Sega.
http://devcast.dcemulation.org/other/pr ... totype.phpI thought it was just an empty shell but looking at it there are similarities, it just seems this one has no labeling by the buttons at all. Also note in the photos the plug that is shown in the video is also similar to the prototype but it would plug into it on the side and presumably also plug into a controller port.
This could be real but I can't be sure if it was a real video from the convention if they just made a mock-up and had a computer generated LCD screen edited in after the fact.