iPod to DAC Connection


I was disappointed that the fourth generation iPod announced this week did not have a digital output so that it could be hooked up to an DAC. I think it could provide near audiophile caliber output if you used the best AIFF or Apple Loseless processing options and a digital output. Now, I'm wondering if it is possible to have a digital output for it by somehow hooking up a cable to the iPod itself or the dock that would be Firewire or USB 2.0 at the iPod/dock end and S/PDIF at the other end to plug into a DAC. Anyone know if this is possible? Does such a cable exist, or maybe the digital bits coming out of a Firewire output are different from those going through a coaxial data cable? Any insights would be appreciated.
bruce_1
All interesting comments and suggestions. I am now leaning toward getting the Slim Devices Squeezebox ($200) mentioned by Macallan25, which is hooked up to the computer (iMac in my case) by either an Ethernet cable or wireless system, and which has coaxial and optical outputs to connect to a DAC (in my case the MF Trivista CD/SACD player is my DAC). I will add a LaCie Big Disk HD, probably the 500GB ($550) model, so I can rip hundreds of uncompressed files to play via the Squeezebox. This is beginning to look like the best option since the iPod-to-DAC doesn't appear to be an immediately available option. I listen to my analog system for most of my serious listening sessions, but for $770 I can assemble a pretty good computer based digital system that allows me to put together my own playlists. Reactions?
>>for $770 I can assemble a pretty good computer based digital system that allows me to put together my own playlists. Reactions?<<

I'm with you. I also have a system for serious listening, but I also need solutions for more casual listening. I have been searching for something that will provide convenience, while minimizing sonic compromise. The computer is the way to go. Plus, if you're married, your wife and family will love the convenience of being able to scroll through albums on your computer screen, making playlists, etc. And you will love the fact that they don't have to fool with your CD's in order to play music. If you have a party, you can let the guests scroll through and pick songs for the background music -- it is a great solution.

The problem with letting the guests scroll through and pick songs for the background music is... well... they seem to invariably gravitate to the most embarrassing aspects of your collection.

Incidentally, if you would like to accidentally maximize your guests' ability to access the worst of your collection, tag a bunch of albums with the genre "SH*T" and see what happens. You are then left with explaining why you actually own an Enya album (bad recommendation from friend) and a Nick Gilder album (coincidence of finding it in cheapo used bin at precisely the *one* time in forty years I actually felt a desire to hear "summer in the city"). Also been desperatly searching for a decent band with a name starting "AA" something to avoid ABBA (was a freebie... honest...) showing up at the head of the artist list. Be warned.
I think they should put sporty tubes on the 'pod as well - of course you are walking around and... OW! THAT'S HOT!
PocketDock combo is a device you attach to your iPod that gives it a firewire and USB out. With it, you can connect to a USB DAC. There are a few high-end USB dacs on the market, but I can't think of the names. Here's the url to the product page...

http://www.sendstation.com/us/products/pd_combo.html