I downloaded a bunch of E3 trailers from the Xbox LIVE Marketplace and I noticed a line of fine print at the end of the Lips E3 trailer. It said that you can use DRM-free music from most of the popular music players (so it's possible that the iPod will be supported), but it will only work if the lyrics are included in the song's ID3 tag.
The mics look kind of cool, but with Rock Band, I feel that Singstar, I mean Lips is a little superfluous.

