If you are going to go analog out of the iPOD, then you don't need a DAC.
(and the only way to get digital out of an ipod is via a WADIA 170i, which is about $380 by itself, then you need a DAC, and then an amp.. or a dac with a built in amp.. overly complicated.. ).
Sticking with Solid State:
I'd look around for something like a Firestone Cute Beyond headphone amp ($187.00) (there's one for sale on HF right now that the guy wants $120 for) and you could add an optional "Supplier" power supply if you want a bit better sound ($117.00). This is strictly a desktop amp, the Cute Battery II (which I use with my AKG K601's and it sounds very nice) can be used with its internal battery or with an AC adapter(I've disconnected the battery cable internally so I can keep the AC adapter plugged in permanently). Since the power supply on these things is just 24V, you might even get better sound out of a beafier AC adapter than the one provided with the unit(which is really what the Supplier is in a fancy matching case). They are very nice little amps you can check them out here:
Firestone Audio Products, Cute Headphone Amps, Fubar II USB DAC, Spitfire 24 BIt DAC, Big Joe Power Amp, Tube Head Preamp,
You will need a ipod to stereo RCA connector (the above site has them for $77, you can find them cheaper on Ebay) for any amp you buy.
If you are into DIY you could also look at a CK2III kit, which has a great following. There is one onsale on HF that a guy has partially finished, you might need to fix up the case work etc..
Starting from scratch, a CK2III would cost you under $200.
Jeff at Glass Jar Audio used to sell CK2III kits, but their not on his site anymore. you might want to email him and see if he still has any kits left..
http://glassjaraudio.com/main.sc
You can also find one of the builders who could make one for you.. like this guy:
YBM Audio products
The CK2III would run you about $400 from him.. and it would beat most of the commercial products at that price.
I was going to build one, but am building a couple of SOHA's + JISBOS buffers myself (a tube hybrid).
As far as headphones are concerned, I Really like my AKG601's, which you can find for around $250. The 701's have a large following but some people find them very analytical(and very white).. The 702s, are a bit more expensive than the 701's and are a much more subdued colour(black or deep blue). and sound the same as the 701's. They are all "Semi Open" designs, so there is some leakage..
Some people think the 701s are hard to drive(need lots of current), which may also be true of the 601's but I have been very satisfied with how my 601's sound with my Cute Battery II.
so, 300 - 400 for an amp, (less if you DIY or buy used) , around $50 for the cable, and ~ 300 for headphones.. and you'll be set..