S/PDIF is rarely used to communicate within a device. If the iPod doesn't have a S/PDIF output it would be almost impossible to add.
Without knowing details of the iPod the onboard chip normally handles all the communiction with the hdd, the reading and decoding of mp3s, and most likely the digital to analogue conversion. Unless there are S/PDIF outs on that chip it won't be possible.
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