I would not use a convertible note as my first choice of financing. As mentioned above the debt investors are not interested in seeing the value of the company increase. Getting them to place a cap on their value in the Series A is not something any smart investor would agree to. Your best bet is to get an investor to accept a valuation for shares and have them work with you to help increase the value of the company.
I'm not sure why I would want to risk buying a iPod touch or iPhone that has been hacked our unlocked. I guess those that do are buying something they can characterize as unique.
I'll just keep my iPod touch an original and ordinary.