Is is it just equally good at a much lower bitrate (thus saving diskspace?)

I think that's the whole idea. Ogg beats MP3 in 128kbps tests, but who encodes at 128 any more? I don't think it's possible for anyone to tell the difference between a properly encoded high-bitrate MP3 file and an Ogg file. So as I understand it, Ogg is really only useful if you're trying to save some disk space.

Since I'm not yet in dire need of disk space on my player, I'm not that interested in Ogg. Besides, Ogg doesn't have as much of a wide collection of third party tools available for it, and it isn't as cross-platform compatible as MP3. I like the fact that I can use tools like MP3 tag studio on my collection, and that I can put the same MP3 file onto different devices and have it work. Just can't do that stuff with Ogg at the moment.

I'm guessing most of the portable mp3 decoders decode their files in hardware, or am I wrong here?

Many devices do, in fact, have their decoders in hardware or non-upgradable firmware. But it depends on the device, I think, you'll probably find a mix out there at the moment. Dunno about the iPod.