I love the iPods. They are tops in usability and the interface simply can't be beat. They have a LOT going for them - including style, and unfortunately, you end up paying a LOT for style. That's probably why your kids want them so bad.
Cheaper alternatives DO exist, but only if it's about listening to portable music, if it's a teen/pre-teen status symbol thing, than only the iPod will do.
There are different kinds of iPods though, the larger, high-capacity ones (some even show photos in colour, which are the most expensive) and the smaller 'cooler' versions that come in multiple bright-coloured shell casings called IPod Minis. Here the minis sell for around 300$ so they should be cheaper in down there, maybe along the lines of 250$ .
Then at the bottom end of the iPod scale, there's the new iPod Shuffle:
http://images.apple.com/ipodshuffle/images/indexwithgum20050111.jpg
Smaller than a pack of gum, you can get this with 512mb, or 1Gb of memory which is PLENTY for MP3s, unless you wish to carry your enrtire music collection with you. Retail price starts at 100$ - more affordable for the kids, but the downside is. there's no screen...