Based on personal experience and reviews of others, I've found that waterproofing headsets comes at the cost of substantial loss of sound quality.
The good news for us is that wakeboarding is not a sport where you're concerned about sound quality when submerged, therefore waterproof headsets are not necessary. A number of manufactures make $10-$20 water resistant headsets, which don't suffer from the same loss of sound quality as the waterproof ones.
Here are some:
http://reviews.cnet.com/4566-6450_7-0.html?filter=500909_5007939_ I've tried most on this list and my favorite are the Sony MDR-G57G. As an over-the-ear headset, it doesn't get water logged and also blocks some of the wind noise (although to really cut down on the latter, a beanie helps a lot).
As far as which player, I use the iPod Mini + H2O case, never tried any of the LF Tunes, but other have and like it, here's a review too:
http://reviews.cnet.com/Freestyle_Audio_Fusion_DMP_512_512MB/4505-6490_7-31484751.html?tag=pdtl-list Have never heard anyone say anything good about the Oregon Scientific players (except the price):
http://reviews.cnet.com/Oregon_Scientific_MP120_512MB/4505-6490_7-31265608.html