Overall, there are plenty of advantages in upgrading to WinCE 3, some reasons subtle and others not so.
For one, I like to read E-books. Right now, Microsoft Reader does not work with the Epods. No big deal, as it sucks anyway.... right? But maybe that's not the point. Microsoft Reader also includes ClearType/Sub-Pixel Font Rendering technology (which improves text quality several-fold,) and through a simple hack can be enabled in any HTML document - but again, it requires WinCE 3.
And, if you never saw ClearType on a DSTN/TFT screen, let me tell you, it makes a dramatic difference in the display.
So that may be just one example, but I bet for every major category there's a loss of functionality without a full upgrade to WinCE 3.