Second, I was curious if there were any production plans for the MP3 yo-yo. I contacted my favorite yo-yo store, Infinite Illusions; they know everything that is going on with yo-yos.

They call the MP3 yo-yo vaporware. Then go on to say that the odds of it working and being a descent yo-yo are extremely long.

They are right. But I would still buy one if it were produced.

A couple of things to add to your comments:

The yo-yo as a rock-on-a-string weapon story is almost certainly an urban legend made up by Donald Duncan to sell more yo-yos.

Yo-Yo means “Come back” in Tagalog. (Philippines)

The yo-yo began its renaissance in the 1920′s in L.A. when a Filipino immigrant named Pedro Flores invented the first yo-yo that could ‘sleep’. Flores later sold the rights to Duncan.

Donald Duncan also invented the parking meter.

In the last 10 years the yo-yo world has gone through a major upheaval, inventing entirely new forms of the ‘sport’. These include Off-String (the yo-yo is not attached to the string) and Free-Hand (the string is not attached to your finger.) They are really amazing. Check out videos at:
http://www.yoyoing.com/videos/display.php#

If you want to learn to do a few tricks buy a yo-yo in the $8-$15 range.

And, there have been serious attempts to get yo-yos into the modern Olympics, but they have never even been granted exhibition status.