Macintouch: Apple Technical Support Issues
I too have experienced a replacement device that was "non-functional out of box" -- aka DOA. In my case I returned a working 9 month old iPod with a one hour maximal battery life and received a refurbished device with a dead firewire port. Apple's somewhat dysfunctional AppleCare service didn't help.
Of course I'm mad at Apple. There are too many stories of this problem for it to be pure coincidence. I think this is the same story as the refurbished laptops Apple sells on its web site, which Macintouch has noted are often trouble prone.
I suspect Apple has contracted out device service and refurbishment, and that there are significant economic penalties for doing too good a job servicing devices. The combination of outsourcing, then providing perverse incentives without honorable oversight, has caused worse problems than defective replacement iPods.
Apple, however, while no saint, is probably not the worst service department in the world. I've heard similar tales about Canon digital cameras. I wonder if modern consumer electronic devices are becoming too complex to service cost-effectively. They are difficult to fully evaluate, so even if a primary defect is fixed a secondary defect may be missed. They are too complex to easily disassemble, so repair may induce new problems. Hardware is increasingly coming to resemble software; it's well known that fixing a software bug is a risky and complex business.
Maybe we need to move to more of a classic "insurance" system to deal with expensive high tech devices that die quickly.
A better system might guarantee replacement of a defective device with a brand new device for about 3 months. After that one would receive a credit for the depreciated value of the device that could be applied to purchase of a brand new device. The rate of depreciation might depend on how much one pays for insurance. There might be business opportunities here for an insurance company that's ready to take this on.