Yes, sound quality on ipods in general is poor compared to the rest.
The reason why people here have irivers is because they have a line out port to hook up to an amp. The iriver h100s even have an optical line out to hook up to a DAC.
Personally i wouldnt get an ipod. The creative zen vision m beats the 5g ipod in just about every way. Same price, better screen, better build, FM/lineout, better sound quality.
I went for an iriver h320 over the ZVM because I like being able to plug my player in as an external hdd and to use rockbox with it instead of the default firmware. It was also $100 cheaper.
So mp3 players I would recommend over ipod: All have FM radio and voice recorder
iriver h120 20gb- 130 bucks new on ebay(only place you can get them) - optical in/out, rockbox Metal case.
iriver h320 20gb- 170 new on ebay - color screen, rockbox, regular in/out
cowon X5 30gb- 230 new - color screen(not as good as the h320s but it supports video playback better ATM) , rockbox. requires an external pack for lineout IIRC.
Zen vision M 30gb - 290 new - best screen by far, best for video playback, no rockbox, lineout isnt as easy as it is with the irivers.