Ultimately, I think the point is to expose kids to these gadgets and gizmos (after all, they're only trying to do what their adult role models do), provide them limited and supervised access to apps and software that makes sense for them - ranging from letter and number recognition to age-appropriate games, and them send 'em out to run and play.
It's all about getting the balance right

I think the two should complement each other. I taught my eldest chess when he was five and sometimes he plays computer chess. I didn't teach him castling or the en passant moves but one day when we were playing, he used them in a game and told me the computer did it when he played against it.

He probably enjoys playing car racing games on the iPOD and it's great for long car journeys but I don't think it's doing much for him.

True. But you shouldn't use the TV or computer as a replacement for giving your child attention for extended periods - not that I am saying you or the OP are guilty of any of these.

Cheers,
Nick

Agreed. Definitely not guilty on the TV front - we don't have one.