Look and feel
The case of the new iPod photo has the same shape as the 40 gig iPod. The difference is that it has a color screen. Seeing the UI in color is kind of cool at first, but it does not improve function a whole lot.

Photo
From the main UI, you can get to the photo section. This gives you all the photos albums. As you have probably guessed by now, you use the wheel to scroll through them and use the center button to go to the highlighted album. Once in an album, you are given a screen full of thumbnails. By clicking on one, it opens full screen.

Games
mmmmm.... Break Out in color… oooooo... Solitaire, now I can see the color of the suits.

As you can see, I do not think color improves the games a whole lot. I think they should have add a game that only plays in color, but most people do not get an iPod for games anyway. They get a Game Boy for that.

My thought
The iPod 40 gig is $399 and the iPod photo 40 gig is $499. For $100 more, is it worth it just to have your photos with you? Most likely, you took them with a digital camera and your camera has a screen on it to see them. Also, do you really need a 40 gig iPod? If you ask me, I would get an iPod 20 gig for $299 and a Canon PowerShot SD110 3MP Digital Elph for $219. That way, you can take photos as well as have an iPod.

What I think is missing
If they added the ability to play QuickTime movies, then I could see spending $499 for it. I would love to be able to take movies from my ReplayTV server (see: ReplayTV and Mac home video server!!!! Part 1, Part 2 or Part 3 (coming soon)) and play them on my iPod through a TV at my friend's house. Now that is what Apple should be working on.