Nice find. Amazing how we don't have more pictures and videos from the vmu mp3 player, the swatch and dvd players.
So it was just a mp3 player in a vmu case if you can't connect it to the gamepad to use it for games. I wonder why would SEGA choose this approach.
My guess it it probably would've connected to the gamepad as well as via a cable. ITT the cable is in the video to demonstrate how it can be used as a standard mp3 with a cable. So as to hint at how it's not necessarily exclusively dependent on a dreamcast. But that's just a guess.
If its fake, is very well made ;D anyway http://assemblergames.com/l/threads/dreamcast-vmu-mp3.8990/ http://segaretro.org/VMU_MP3_Player
Aw dam! So someone here actually had one back in 2006 - even though its just a dummy unit I'd pay good money to get hold of one!!