Just got back from the Ohio HTCIA 2008 conference and saw that Dave over at his Securi-D blog posted about an MP3 watch he bought off of eBay from a Chinese seller. When he plugged it into his computer, his AV detected a virus on the watch. Too funny.
Unfortunately, this thing isn't new. Within the last year, we've started to see more and more products appear which have been infected with some malware. This is not a new trend and I see this becoming more of a problem in the future.