As silencio said, it would not appeal to users who don't use the included earbuds. And it would also annoy lots of users who <i>do</i> use the included earbuds. I for one would hate to have my iPod made bulkier simply to include a feature that a significant portion of the userbase wouldn't even use.
Possibly because it wouldn't appeal to all the users who don't use the included iPod/iPhone headphones. I for one use a pair of Motorola S9-HD bluetooth stereo headphones with my iPhone.
If you look at the iPod carefully you'll see that they number of mechanical components is cut down to a minimum.<p>The most fragile components are the mechanical ones and the battery, if your iPod fails it is probably because of one of those.<p>The headphone wires are <i>the</i> most fragile bit outside your iPod. I've had many of these fail, if they were an integral part of the iPod you'd lose the whole device, or you'd have to get it repaired.
3rd party retracting headphones exist in the market, no need to build that mechanical functionality into the device.<p><a href="http://www.engadget.com/2007/02/05/sonys-three-new-models-of-retractable-headphones/" rel="nofollow">http://www.engadget.com/2007/02/05/sonys-three-new-models-of...</a>