3rd Generation iPod digital out

If you already have a system with an Aux in you could just use a LOD and get a 110v to USB adapter.  This would charge your ipod while you play music through your existing system.

The TEAC below is known for supporting older ipods.

TEAC SRLX5iB Hi-Fi Table Radio with iPod Dock (Black)

Why are you trying to bypass the DAC?  I think it is a Wolfson chip in there which is actually pretty decent.  I use it as a basic reference comparison to other DAC's all of the time and it remains an excellent baseline DAC.

For example the DAC inside the iPod, would probably out perform the UDAC-2.  Paired with the proper amp and speakers / headphones I could make it sound like a much more expensive DAC.  There was an audio presentation done with an iPod for example where they told the audience that the system was a multi-thousand dollar system.  They then asked how expensive the system sounded and the audience was convinced it was very expensive, but in the end it was an iPod fed into a nice amp and through great speakers.  The iPod simply played lossless files.

Playing compressed files through any DAC is not going to make your speakers sound any better.  It all starts with the source and then DAC, amp, and finally speakers.

You may want to look at the iMod from Red Wine Audio which uses the Wolfson DAC chip from earlier generations of the iPod Classic.  For the iPad, the camera connection bypasses the internal DAC for USB out to an external DAC.  Hope this is helpful.