With the iPod lineout to a Musical Fidelty X-CAN v3 I have not been able to tell the difference between 320kbps AAC and Apple Lossless. I encode everything in Apple Lossless now as it's basically a perfect copy of the original CD. I rarely use the iPod headphone jack except on 'planes.
One problem I think is to do with the size of the Apple Lossless files is that the iPod freezes every now and then (rendering it useless until the battery runs out). I think that because of the larger files the hard disk needs to be respun more often to refresh the buffer and this operation is error prone in bumpy situations like walking, running or on 'planes. It never freezes listening at work in the cradle.
One problem I think is to do with the size of the Apple Lossless files is that the iPod freezes every now and then (rendering it useless until the battery runs out). I think that because of the larger files the hard disk needs to be respun more often to refresh the buffer and this operation is error prone in bumpy situations like walking, running or on 'planes. It never freezes listening at work in the cradle.