I have solved the "How do they sell for so little on Ebay" question. As I had suspected, vendors go to sites such as liquidation.com and bid on boxes and pallets of stuff. Basically, you buy large quantities of stuff for several hundred dollars each, and then hope for the best.
In many cases, you don't know what your actually going to get. Sometimes they have pictures, sometimes they don't. Sometimes its returned merchandise, sometimes it's office salvage.
As for me, i decided to try the high road and bid on boxes of IPods. I figure, even broken, it can be sold for $60 each. I bid on a box of 30 and a box of 50, no idea how good or bad condition they are. I am hoping I can FrankenPod them and maybe resell a few working ones to turn some profit, then either keep the rest for parts or auction them off as well.
There is a guy (or Two) on EBay right now that sells them. They seems to be doing pretty well for themselves. Selling them for $30+ each. At that point, it doesn't matter how much they go for each. Just pay about $25 or less each at wholesale and I should be OK. I would be looking about about $1000 profit or more, believe it or not.