The Zune is like an iPod, Microsoft tried to copy apple in every way possible (not a bad thing, as apple controls the market share quite evidentely) however as with everything microsoft makes at first, it blows.
The original zunes are not very good. I've owned both, and messed with both.
The iPod is much smaller (thinner) and has better software. I'd perfer to use no software and have directly drag and drop, but if I had to pick, I'd pick iTunes. the Zune software to me is way to flash-oriented and really is a clunky program (3.0Ghz Dual Core+2GB Ram+512mb video card, this computer doesn't blow).
Sound quality, it really depends on the pair of headphones you use. You could easily find a good pair of headphones that work excellent for the zune and not well for the ipod, so if you can find a pair that match the player well, then it will sound better. For instance, My Shure E4C's sound good on the Zune, not so much on the iPod, and excellent on my Cowon A2.
But the fact that the HUGE ammount of 3rd party software, plus the gigantic market share, and the recent move to non-drm music files, makes the iPod better.