There are a lot of options, varying widely in cost, and these have been posted already. My question for you -- what format is the music in? 128kbps AAC files purchased from iTunes? Similarly lossy mp3's? Or Apple Lossless that youve ripped yourself? (I assume they arent flac files unless you've installed a third-party OS on your iPod.)
I think that you need to do some serious listening before you spend a bunch of money on an external dac to decode what may be very lossy files. I just don't have enough experience listening to such set-ups to know whether a lossy, compressed mp3 or aac file will sound substantially better via a Wadia doc (that has an external dac and bypasses the iPod's dac) than with a cable from the headphone "out"
I think that you need to do some serious listening before you spend a bunch of money on an external dac to decode what may be very lossy files. I just don't have enough experience listening to such set-ups to know whether a lossy, compressed mp3 or aac file will sound substantially better via a Wadia doc (that has an external dac and bypasses the iPod's dac) than with a cable from the headphone "out"