All iPods in the past few years support gapless, but only the last (or couple of last) Nano models support cross-fade. People have been asking about it for iOS devices since at least 2008, so I don't think it ranks highly on Apple's priority list. Then again, what does?

I have no idea if the API allows for playback of multiple tracks so that a third party player can implement their own cross-fade. There s at least one app that does it, but I don't know if they're using the API for playback.