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
If you go down the SendStation route, you should take a look at the WaveTerminal U24 which is a pro-audio USB device.

Provides Toslink, S/PDIF and 1/4" RCA outs and requires no power (gets it from the USB). Have one between my Mac and a Monarchy DIP/Channel Islands Audio DAC and it sounds very, very good - especially for $200 at B&H!

http://www.esi-pro.com/viewProduct.php?pid=10&page=1
I'm using the Apogee USB Mini-Dac for a computer based system. The sound is excellent!
It is not clear from the promo whether the PocketDock will let you plug an ipod into a USB DAC. Correct me if I am mistaken, but it seems like it is just meant to let your ipod interface with your computer -- similar to the accessories that already come with the ipod.
An update: I got the Squeezebox, hocked it up with an ethernet cable and, with much help from Kevin at Slim Devices, got it to play my iTunes playlists. Then I noticed it would not play all the songs on the playlist. Turns out that because of some licensing policy, no 3td party device hooked up to an Apple computer will play songs that have been downloaded to the iMac. So I could either keep the Squeezebox and not be able to play downloaded music, or get an Airport Express and play everything, but through a optical output instead of coax into my DAC. I chose to go the Airport Express route but use the ethernet cable I already had for the Squeezebox. I get the computer programmed at the Apple store in Chicago for this, come home... and it doesn't work. Apparently the ethernet switch I'm using (so I can hook up both the Airport Express and my cable modem) is not allowing the connection to be made to the Airport Express. I'm going to try a "Dumb" hub in place of the switch, and if that doesn't work I'll have to get the Airport Extreme card and do it wireless. That is, unless one of you knows of some way to do this with the ethernet cable that I haven't tried?
Bruce_1, Did you make progress on getting your digital music through your router to Airport Express? Thanks for posting the limitation of Mac iTunes (I assume) downloads not being playable through third party gear like Squeezebox. Have any idea what the logic behind that is, given that iTunes is a multiplatform solution to begin with?