Ultimately, this is a gadget for techies not consumers of electronics.
How entertaining can it be to watch a movie on a 1.5" screen? It's like watching a movie through the scope of a camcorder... not very entertaining never-mind fun. Even if the Archos did deliver an enjoyable experience it is difficult to share with more than one person.
To have an enjoyable experience the minimum size screen would be similar to a PDA; where a majority of the product's face is viewable area.
IMHO devices like Archos have nothing more than a "wow" factor. You can conveniently store media and share the experience with one other person when you press your heads together.
I think the Archos is cool but it will not deliver an enoyable experience.