They do work well as flash drives. All shuffles are 'Windows formatted' (even if used on the Mac) and hence can easily transfer files between Windows and Macs.
The only issue I don't like is that you must manually allot the memory for music and files. This is not a dynamic setting. Once a 'partitions' is full you cannot store any more music/data on it, even if the other 'partition' is completely empty. You need to reformat the shuffle (delete all data) to change that setting.
And also of course you pay for the music playing ability. A plain flash drive will be almost half the price for the same capacity. But it is worth noting that the shuffle has the best audio quality of all iPods, it uses a different chip which in tests demonstrated superior quality.
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