I guess it's worth $59 if it covers you for two more years, since you're almost certainly going to want a battery replacement in that timeframe (even if you sell it, you'll get more for it with a new battery).
I had my 4G 40Gb iPod for about a year and sold it for $28 less than I paid for it and bought a Nano. I'll probably sell the nano next year and get the next one, since iPods depreciate about as much as cars do, which is to say, not much.
So for me, it's not worth the extended warranty, as I'll never have one long enough to take advantage of it. I also keep my iPods in a case all the time and am pretty careful about not breaking or scratching them.
Man, I loves me the Nano, though. No more lag between songs, no three seconds to turn on, it's lighter, the battery lasts a long time, the small size is great. I don't think I could go back to a hard drive based player again. But I hope they increase the flash capacity soon, although having said that, the 4Gb is actually pretty ample as I tend to listen to the same songs/albums over and over again for a while anyway, and if I want variety, I can just sync it with my PC and get all sorts of new stuff, loaded by any kind of criteria thanks to Smart Playlists in iTunes, which I'm just starting to use more and more.