As an addendum to my ramblings here, I discovered that the problem I was having was with the $99 device that was providing the line output on my iPod. Can't recall the manufacturer, but I believe they were the only ones offering a dock with dual RCA line-outputs. Whatever circuitry they put between the dock and those RCA's was wreaking havoc with my output signal and the music sounded awful. I exchanged it for the much cheaper iDock and went with a $69 Signal Cable silver iPod interconnect and have been happy as a clam since. I recently noticed
this mini-system by Monitor Audio claiming to be getting a digital output signal from the iPod lower connection, which it runs to its own DAC and bypassing the DAC in the iPod. If this is so, apparently it is possible...why isn't anyone making a simple cable or converter to do this?