I used a 120GB ipod for several years and when I bought my X1 it was better in almost any aspect. Sound is better IMO, power, compatibility, etc. The only thing i miss from my ipod is the touch wheel. The software used to be better in the ipod but now with FW 2.0 the X1 is pretty good. Also storage, 120GB was difficult to achieve some years ago, but now you can get a 128GB card for a reasonable price, also you can buy more than one and swap them on the go. Line out is a plus, the X1 uses the same output for both headphones and LO, other Fiio DAPs use a separate output. For the ipod I had to buy a separate accessory (from Fiio also). The X1 is not tied to iTunes, you can just copy-paste your music in the card and you're ready to rock. Finally charging, micro USB is pretty convenient, having to have a separate charger for my ipod and for my other devices at home/car/office was annoying for me.
Yes it's too bad apple has a patent on the touch wheel technology. The touch wheel would make the X series players amazing.