Ipod Dock with direct out?????

Are we talking lossless files on the iPod? Because if not, I really don't see the merit of spending all this time, effort and money on a compressed signal in the first place.
Given the underlying purpose of iPods (portable audio), why do so many want to use them as home audio, instead of a PC or CD player? Surely even a good universal player (eg Denon etc) would do a better job playing mp3 discs than an iPod?
PS. These are serious questions, I'm not trying to be smart; I really don't get the aftermarket high-end iPod accessory thing.

Carl, I have an iPod that is 160 gig that I have loaded all the CD's I own onto, at least the songs I care about; I loaded these via Apple Lossless and I have used somewhere around 35 gig of the iPod. Some of us find it very convenient to not have to go to the CD cabinet to get music, not to mention choosing shuffle and hearing all our music at random...and when you head out the door, you can take your music collection with you, if you so desire.

Carl, we're talking about putting lossless copies of your whole cd collection on to your IPOD and using it as the transport running into a DAC.

Well there you are... I had no idea the iPod could actually output digital and bypass it's own DAC.
I have much to learn!
I gather then the iPod's internal DAC is fairly ordinary?

I had no idea the iPod could actually output digital and bypass it's own DAC.

Well, the Wadia 170 iTransport is the only licensed product on the market to do this. But, as you can read in this thread, MSB offers the ability to modify the iPod to do this as well.