You have to connect it to a network to control it (if you dont' have a display), but otherwise, it works just fine headless.
I will confirm that later. My daughter's watching the wiggles on it right now.
Amazon.com: Metallica: Metallica: Music
Amazon.com: Master of Puppets: Metallica: Music
Amazon.com: Ride the Lightning: Metallica: Music
Amazon.com: ...And Justice for All: Metallica: Music
Amazon.com: Kill 'Em All: Metallica: Music
Most people are happy with their 128k files. It's not unreasonable to charge people a small upcharge to replace all of them. When they release a new version of a cd they don't offer to let you replace your existing cd for free, or even the cost of the media. They offer to let you buy it all over again.