a LOD bepasses the internal Amp, allowing you to use your own amp, and the the benifits from your own amp. ie: however your external amp sounds ect.
if you use a 3.5 to 3.5 to a amp, you are amplifying the internal amplifier of the ipod, so you arent getting a pure amplification.
depending on the conductor materials, you can have a cleaner signal using a LOD, you can like i said also benifit from using only the external amp and bypass the internal ipod amp.
IMO a lod is the only way to go. only real way to ontain a cleaner signal bypass the internal amp and use a external amplifier.
there are devices like the cypher labs algorhythm solo and the fostex hpp1 that use the ipod and bypass both the internal dac and amp, thus allowing you to use a external amp and dac.