Things aren’t looking too good for Apple in Japan today after it was reported that first-gen nanos have been smoking and/or sparking causing minor burns. And now Apple will gladly replace your first-gen Nano if it’s been smoking or sparking. They should replace them all regardless, IMO. Might as well contact AppleCare like they say to find out.
“Apple has determined that in very rare cases batteries in first generation iPod nanos sold between September 2005 and December 2006 can overheat causing failure and deformation of the iPod nano. Apple has received very few reports of such incidents (less than 0.001 percent of first generation iPod nano units), which have been traced back to a single battery supplier. There have been no reports of serious injuries or property damage, and no reports of incidents for any other iPod nano model.
Any first generation iPod nano customers who have experienced their battery overheating should contact AppleCare for a replacement. Any other customers who have concerns about their first generation iPod nano battery should also contact AppleCare.”