I've read that the iPod can play 24 bit files at 48 khz, but not through the headphone jack as it downsamples to 16 bit through the headphone jack. I'm not sure if this is true though.
Where did you read that? The earphone output and the line out don't care what the heck the signal is, they work on the analog signal. Digital audio passes through some kind of processor like a DSP, or even a more basic processor (which can also apply DSP effects, but in the case of a player, the chip does a bunch of other things as well), then goes into the DAC - the
digital to
analogue
converter - where the 1's and 0's of digital code gets transformed into an analog waveform, which gets passed on to the amp (whether it's inside the player itself, or through some kind of analog output stage going out to another DAC).
In the case of the iPod, you have an integrated audio chip that has both the DAC and the headphone amplifier chip. It's not even a "real" line out in the same sense as stand-alone DACs/DAC-HPamps/CDPs/other digital sources, because for the most part it just takes the signal from the DAC and (AFAIK) bypasses the section for the headphone amp and disables the volume control (in a way, that's actually better, as some analog output stages not just amplify the signal, but color it). The thing is, the iPod uses a 16bit/44.1khz to 48khz DAC. There is no way for it to play 24bit files - if that were the case then people on Head-Fi would have waited for Apple to kill the iPod before buying the DX50 and X3.
Now,
if someone has managed to play "iTunes 24bit" on it, iTunes could have downsampled the files on the fly during syncing (assuming iTunes recognized the files - I wasn't even aware that they sell high res tracks), the same way that you can use Apple Lossless in your computer then automatically set it to compress the files when syncing a device into any MP3 bitrate you want. Also, if whoever that was who claimed the iPod plays 24bit and probably (based on your wanting to do the same thing) noticed any difference, the improvements are caused more by better recording and mastering than the bit depth and sampling rate. Let me put it this way: what albums are you statistically more likely to run into being sold in 24bit (also vinyl), and what tracks are topping iTunes download sales? This is like Janes Monheit, Norah Jones, Dream Theater, and Coltrane vs the second group with Nicki Minaj singing about giant snakes that like bread (figuratively speaking), where even the 16bit copies of the first group are recorded and mastered better.
