Is this the iPod you're using, from back in 2005:
If so then it has the familiar dock connector, for which many LODs are available.
As Doc H points out, the LOD cable takes the analog 'line out' signal. So with
this you're still using the iPods internal DAC, but bypassing
the iPod's amplification circuit -- which you don't need if you're going to be piping
the analog straight into an external amp.
The AKG K550 is reputed to have a nice soundstage for a closed design. That's
something you may appreciate coming from Grados. But, yeah, these are pretty
big... and when closed-back headphones are dislodged by the pillow, you're like
to not get a good seal. So smaller may be better.
I do sometimes wear my ATH M50 closed back headphones in bed. But
nowadays I more often wear my Etymotic IEMs. That's the perfect thing
for bed, in my experience. Complete in-ear seal and doesn't get dislodged
by the pillow. Not everyone like the feeling of IEMs... but for me is was
something I became accustomed to after a couple of weeks of use.