Hey Peter - According to Vinnie at Red Wine Audio there is no SPDIF tap within the iPod. I asked him this same question at someone elses suggestion when I started a similar thread. He does some kind of modifications to the line stage of the ipod. One thing he could not figure out was how a company called Monitor Audio, claimed to be utilizing their own DAC in their mini-iPod system. You can read that claim in the AA description here.
Marco
Marco