If they wanted to continue the iPod nano line, Apple should probably use watchOS. It's perfect for a device that size.
Basically such an iPod nano would be a vertically elongated Apple Watch with a scroll wheel instead of the "digital crown" (that tiny wheel on the side of the Watch), and a Lightning connector instead of wireless charging.
Basically such an iPod nano would be a vertically elongated Apple Watch with a scroll wheel instead of the "digital crown" (that tiny wheel on the side of the Watch), and a Lightning connector instead of wireless charging.