SQ with an iPod is pretty good.. Controlling the iPod is pretty bad.. 60GB worth of tunes is a nitemare to navigate with my current setup, so I just hit random and listen to whatever it decides to play.. Make a lot of playlists and it's not so bad, but I haven't gotten around to updating my playlists since I upgraded from my 20GB..
Make sure you disable the EQ and the 'Sound Check' on the iPod though for the best results..