I use one of these Sansa Clip 4gb players - reasonable price, very small, built in clip on back, drop and drag files from your computer - and I've been happy with it. As Neil says, upgrade the headphones:
http://www.newegg.com/Product/Produc...82E16855125128
I'll chime in, though, that listening to music while biking on road may not be the safest thing - I've been a runner for 20+ years and I won't listen to music when I'm running anywhere near cars.