Using iPod Classic as music server

playback using the iPod is not the same as when the source is the CD player.

I'm not sure what you are comparing. Playback from your computer vs. iPod?
Maybe the master clock in the CDP is superior to whatever is inside the iPod. The CD (or computer) is controlling jitter and possibly has a better DAC. Thus, better sound.

Are you using the 30 pin connector on the iPod or the headphone jack? You will get significantly better results using the 30 pin connector, but in my experience the DAC on the iPod cannot compete with a CD player. Something like the Wadia essentially turns the iPod into an external hard drive and should improve your listening experience. There is another product that I have seen on Music Direct that appears to do the same thing. I have never been curious enough to pull the trigger to see how they do.

The analog section of the ipod is pretty bad. You can't expect it to perform in the same league as your Shanling. It would be no different than if you were to take a portable walkman style CD player and put that against your S-100.

If you want to use your ipod with good results, you'll need to run it through some type of dac. Someone above mentioned the Wadia. I would go with something like that.

I have downloaded all my CDs to my Mac Mini. They are played through a M2Tech HiFace using Audirvana and an Eastern Electric DAC. I synch my 4 ipods to the Mac Mini using each for a separate genre or style. All of my music is in Apple Lossless and is synch that way to my classic ipods. I can carry my entire library of music everywhere I go. I have an apartment away from my home. I use a Pure i-20 dock ($99)from the 20 pin connector and the digital out to another DAC there. The i-20 dock takes a pure digital signal out of the ipod without using any Apple conversion. It is a pure digital stream. The digital stream is identical to any other source be it computer or digital out from a CD player. Thus, I have all my music in both places. Another advantage is with the i-20 you can use an ipod Touch and wi-fi to stream any internet music source and also get a digital stream, although it will be a compressed and lossy stream, whereas the Apple Lossless from your classic ipod will be lossless. I liked the i-20 so much I bought two to have a spare but have not used it. Highly recommended.

I started out my hifi hobby with exactly that - an iPod Classic.

It was mated to a Wadia iTransport which was hooked up to a Benchmark DAC (the DAC1 Pre was the flagship then). The Wadia was the first of its kind - an iPod digital dock - it basically took the digital data from the iPod, bypassed its (frankly quite shoddy DAC) and passed it to an external DAC.

The DAC1 Pre was also (as its name suggests) a preamp. So all I needed was a couple of mono blocks to drive my speakers.

I then upgraded the power supply of the Wadia and made all sorts of upgrades over time.

These days, of course, you can go for much cheaper options than the Wadia. The Pure i-20 dock does pretty much the same thing for a whole lot less and it even includes a pretty decent DAC inside if you don't want to spring for a new one.

But here are the downsides.

One, controlling the playlist from the iPod is not much fun. The remote on my Wadia allowed me just the basics - pause/play, and track forwards and back. There's no way to change albums or playlists unless you get off your ass and walk to the iPod on the dock.

Two, you'll find that 160GB will get filled up pretty easily especially if you start ripping more of your CDs.

Three, as you've discovered - there's something different about playing back even a bit perfect copy like Apple Lossless on the iPod. I know you'll hear comments like "bit perfect is bit perfect". But give this a try. Rerip or convert some of your Apple Lossless songs into AIFF format or WAV format. Sync them to the iPod and listen to them again. I suspect you'll hear an improvement. And AIFF takes up even more space than ALAC (Apple Lossless) so the iPod's 160GB would start to look even smaller.

If you have a spare PC/notebook lying around and a have a respectable DAC already in your system, I'd recommend having a look at JRiver. It will import the music already in iTunes and even sync your iPod for you - but that's not the main thing. The PC can be used as a pretty decent music server.

All you need is to hook it up to a DAC. If your DAC is new-ish circa 2-3 years, you should have asynchronous USB connectivity. Use a USB cable to hook the computer to the DAC and voila. Instant music server. The good thing is that storage is cheap and you should be able to use a large HDD to keep your music library going for a long time. If your DAC is older, you can grab one of those asynchronous USB-SPDIF devices that provide a way to connect the PC to a SPDIF input on your DAC.

If you are a Mac user and already have iTunes installed, just buy a copy of BitPerfect from the App Store, and download the free Remote app from Apple on your iPhone or iPad. Then hook the Mac to the DAC (either using the DAC's USB input as mentioned in the PC example) or a USB-SPDIF connection.

Hope this helps.