Errrrrrrrrrr....No. .MP4 is a video which has been compressed so it could be read in streaming. Lots of MP3 players are doing MP4 now (Archos, Sony, etc...), but thet're iPod that doesn't read MP4 (Nano and Shuffle)
Yeah AAC is the shape for iTunes, in which the software converts your MP3.... AND MP4 are converted into a video shape for iTunes but I don't why, for I don't use videos on my iPod.
iPods are a lot better than mp3 players. The only thing that's wrong with iPods are the prices. They're wayyyyy overpriced. Unless it's a shuffle. But that doesn't have a screen and you can lose it in a day.
Honestly the argument would depend on how much it can hold for me, I need an iPod Classic (120 gigs) just to hold my music, that's not including music videos or podcasts. So for me iPods are the best.