burst into flames. Seriously, how many more cases do we have to see? Even after giving Apple a stern talking-to and ferocious wag of the finger back in March, Japan's government is once again investigating possible battery defects that caused a pair of Tokyo nanos to burn: nano model MA099 recently singed a piece of nearby paper while a model MA005 nano burned a traditional tatami mat in January (no injuries were reported).
Presumably Apple is calculating the cost-of-recall at this very moment. In other words, take the number of 1st gen nanos in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, they don't do one.
Update: Japan has issued a warning to iPod nano users saying, "Users need to be careful about overheating of the machines," particularly when charging the players. Japan's government has reported a total of 14 similar incidents to Apple related to models MA004J/A, MA005J/A, MA099J/A and MA107J/A all sold between September '05 and September '06 -- two of which resulted in minor burns. NHK claims that Apple does not plan a recall but is ready to exchange defective parts.