H2O Audio is now shipping "Outdoor", a waterproof cover for iPod nanos. Fitting both 1G and 2G models, the housing is designed for sports enthusiasts who want to bring along their tunes without worrying about destroying their nanos with mud and water.
The housing is apparently not meant for full submersion and is not fully waterproof. Instead it's been designed for land-based activities like snow sports, climbing, hiking and biking. It retails for about 40 bucks.