Hey, Smash. Good to have you back.
I purchased a GP2X back in November and have been very happy with it.
To directly answer your questions:
1. As far as MP3s go, the GP2X is great. I have a bunch of MP3s on my 1 gig card and listen to them all the time. The sound could be slightly better, and if you read some of the forums about the GP2X you will find that some people (myself included) have had certain problems with the headphone jack. Some people have even had their headphone jack fall into the unit. I myself have had only problems with the headphones themself, trying to find a set that fit correctly and worked. Go figure. Still, the MP3s play fine. I use it all the time.
2. Video playback is pretty great as well. You will have to encode your videos to either Divx or Xvid, but that's not so hard and once you do you'll have a great experience with your GP2X. Also, since the screen is kinda small you can encode the video to 320x200 and still have a great picture. If you intend to use the TV-0ut feature you'll want to encode higher but if not, you're good to go.
3. Now, on to my favorite subject and consequently the thing that my GP2X does most, Emulation! Here are the big three in my opinion. First, MAME2X from Franxis. Dude, it rocks. You'll need to get your hands on the .34 romset which can be a problem but in the end it rocks. I'm a huge fan of arcade games and this is probably how I spend most of my time with my GP2X. Good stuff.
DRMDX is the emulator for Sega Genesis and Megadrive games. All I can say is that it is so close to perfect that you won't know the difference. It's great. I can't get enough Sonic.
Stella GP2X is the Atari emulator, and but for a couple niggling problems such as bad joystick movement in the menus and a couple sound hiccups in the games this emulator is great! I forgot how much I loved Yar's Revenge and the Atari version of Warlords. Love it. Love it.
As far as Daphne GP2X you need to check out Matt's thread about this exact subject. You can find it here...
https://www.daphne-emu.com/phpBB2/viewtopic.php?t=1933
Ok... What about problems? I already sort of covered the the headphone jack thing, so I won't go any farther with that. Other problems that you will find covered in other forums are: The joystick is kinda janky, but it would seem that it has been mostly fixed in software. I personally don't have a big problem with it, so I can't say much. What bothers me more is the screen on my unit. It has some odd light and dark lines that can get bad from time to time, but are, again, easily fixed by a software.. um.. fix..
ok.. enough for now. Hope that helps.
If you have any other questions, let me know in a PM.
Pariah