We have a teacher who would like to start allowing the students to use their own mp3 players in the classroom. The administration is supportive but would like to see if any other schools are doing this and have a policy in place.
Our policy is that the usage of mp3 players is up to each teacher's discretion. I have found that students who use these devices while completing projects are more focused, more attentive to detail and are able to tune out their peers who may be disruptive. The caveats are that they are not allowed while I am lecturing, testing or giving directions. If one student violates this, then I remove this privilege for days or weeks. Most students don't want to be the one responsible for losing the privilege for everybody, so they follow the rule. Additionally, I have found that students are more likely to access podcasts if they have are stakeholders in the process.
At the school I worked at last year, students were allowed to bring mp3 players and cell phones for use before and after school, on the bus, etc. We made it very clear that if the equipment was used during any other time, it would be confiscated (cell phones would have to be claimed by parents, and other electronics would be ours until the end of the year). Students, parents, and teachers all signed a contract agreeing to this procedure. Even though it was a pretty rough inner-city school, we had few problems (about as many as before we allowed them at all).