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According to Electronista, the player is meant to be a direct competitor to the iPod Touch.  It will have a 3.3inch OLED screen at 480x272 resolution.  It will also have a HD digital radio tuner and will be able to play HD video through a TV via a docking station. 

It will be WiFi enabled with a specially modified version of Internet Explorer included aimed at Multi-Touch users.  The entire device will run on a modified Windows CE platform.

There is also talk of a video download service being introduced as well as the possibility of touch games as well.  More information will apparently be revealed soon at the Electronic Entertainment Expo (E3) this year.