Do a search for DAISY MP3 player.  Its not pocket size but you could redo the board maybe to make it smaller.  Uses a PIC18F device...can't recall what it is exactly and a MP3 decoder chip from VLSI and stores the files on a SD card.  Its a kit, one SMT chip (the MP3 decoder) but otherwise it takes an hour to build it, PIC is pre-programmed and the sound is just as good as my ipod or nureos player.  Its around $100 but for what I needed it for, was easier to build it than hack something else.  The interface can be parallel or serial as well.


       
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