Yeah, blocking copyrighted music doesn't make sense. Think of how many customers they'd lose if people couldn't put their cd collection on their ipod. Apple is way to business savvy to do something like that.

MP3's are a pretty lossy file format, however, meaning that they lose information everytime they are transferred from one point to another. I could see Apple putting something in the software that would detect how much "loss" has occured, and if it's too much it could be determined to be pirated and not allowed to play. Still seems like a bad marketing move though.