I have an iPod, but I've yet to buy anything on iTunes. I like to go out, buy the CD so I feel like I own something, and then copy it onto my iPod.
We have something really luck in Canada though. We are permitted to copy music cds as much as we want. We can't give out the copies, but if I borrow a music CD from a friend, I can legally make a copy for myself and then return the original to him. We pay extra taxes on our blank cds but hey, it's cheaper than buying the cd outright, and the extra taxes get redistributed among the musicians in our country, so no one loses out.
I don't see CDs losing out too soon, just because I can't help but want a solid item to own.