I really don't see it as Mp3 vs MD.
They compliment each other. Mp3 for the home and MD for portable/car, at least in my experience.
I have a dedicated Mp3 server (stripped down, networked, PC box in a black aluminium chassis) as part of my living room stereo, wired through the amplifier and TV for playlist selection, etc. This currently has several thousand tracks on it, more by the day, and is a wonderful bit of technology. It's also extremely cheap, compared to it's equivalent, which would be something akin to a 500 CD jukebox. This isn't just an outlet for audio gained from the internet, I've also converted pretty much all my CD collection onto it because of the sheer convenience of the thing, especially with very long playlists.
I wouldn't ever buy an Mp3 player (current technology, at least) for portable use because those I know who have purchased HDD based products have found them unreliable, and even the most generous of solid state memory based products offer WAY too little space to store a decent number of tracks at 192kbps or above.
Sony MD (I have an MZN707) via USB2, however, offers extremely quick Mp3 -> ATRAC transfer, easy track management, generous storage of circa three hours with LP2 (I do notice a quality drop with LP4, although this is not prohibitive), and astounding battery longevity - I used my player for a month recently on holiday and it still came back with a near full charge on a single duracell. Sound quality is excellent throughout - the quality of converted Mp3 is not that different from writing out CD audio to the MD via the supplied optical cable.
With the added bonus of Mp3 conversion MD has gone from being a desirable gizmo to the most astoundingly useful gadget I think I've ever bought.