+1 for number 1. Sort of like, a mini coverflow of the last two songs played, the current song, and the next two. Except instead of coverflow, it would be more like thumbnail views of the songs that would act like buttons you could easily press.
I agree that playlists are the hardest thing to select in flicktunes. Either a playlist gesture that would bring up a screenful of playlists in thumbnail view (again, thumbnail style, a little like the genius recommendations in itunes except tuned for the iPad/gesture environment, see pic below)
Video playback would be a no-brainer and would work just like the tune selection does
I agree that an option for lyric display is good. Maybe a slow scroll over the album art?
Autodim for night mode connected to the clock or gps would be nice.
I realize this is way out there, but there's no way for a remote device to control the tunes, is there? Like a bluetooth or wifi device to allow steering wheel buttons to advance/pause/previous.