Of course, there are some problems. It sounds scary, but don't go running off to burn your iPod just yet.
The issue has nothing to do with iPods; it's an issue with the Nike transmitter that can talk to an iPod. And the devil, as always, is in the details.
In order to track someone this way, you have to...err, set up a network of receiver devices all around the area. The transmitter has a very tiny range; it's only intended to transmit a signal about six feet or so. The only way to "track" someone is to construct large number of listening devices and spread them all around where the person you are "tracking" will be...and it stops working as soon as that person walks out of the area.
You'd actually save money and time by tracking someone with one of those little tiny TV cameras you can buy at ThinkGeek.