Whether you use an iPod or another unit, the quality of your sound is most easily enhanced by adding high quality accessories. You will get the most bang for the buck with higher quality headphones, then a separate headphone amp, and finally a better headphone cable.
To add an amp, there is an aftermarket cable for the iPod that allows you to use the iPod line-out rather than that lower-quality headphone jack. (the jack is only accessible via the dock with the standard equipment). This lets you go out of the iPod into an external amp such as a Headroom which will give you much better sound quality.
There is an excellent web site devoted to headphones and music players such as the iPod: head-fi.com -- check it out if you want to really jazz up your personal listening experience.