I just got around to trying out the Arcade (bought as a present at launch) and it seems to be pretty faulty.
After inserting batteries, the unit looks to be fine. It will give off a loud hiss as if the on-board speaker is working, then I hit PLAY and nothing. The readout/LED's show that the unit is playing, and I get a brief hit of sound, but then nothing. The volume was up enough to chuck out audio.
I then tried some other batteries and connected it to my amp. The unit played for about 20 seconds, then seemed to hard lock?. Now the 2 button is on and nothing else is functioning.
I put together a little video:
I've just contacted TE about getting it swapped out, as something is very wrong here.