iPod: Questions and Options

Well, with rumors floating around of a new 60GB iPod due in a couple months, I pulled the trigger this week on a current 4th generation 40GB click wheel model. I'm really enjoying the ease of use and simple yet elegant [as always] Apple industrial design.

I also ordered a Dension ice>Link v1.1 car interface for my '99 BMW M3 which sould be arriving soon.

http://www.densionusa.com/x/index.php?option=content&task=view&id=375&Itemid=79

I have a few questions however for those iPod users with more experience.

1. Which earphones/headphones are you enjoying with the iPod?
I was using a pair of Grado SR60s at work with my Sony Discman and iTunes on my G4 Mac, but they sound dull and closed in with the iPod. I feel more satisfied with the cheap little earbuds that come with the iPod. The Grados seem to tame the digital nasties from my Discman and do well with my iTunes, but they may be too dull for the iPod. Any suggestions? Etymotics or Shure earphones? What about headphones?

2. What does the "Sound Check" function on the iPod and in iTunes do?
It's "off" on my iPod, but I have it "on" with iTunes when importing songs.

3. Which compression scheme do you like?
The first group of songs I imported into iTunes I did with the AAC Encoder set to 320kbps. The last batch I imported using the Apple Lossless Encoder. I've yet to compare the same songs side by side, but I was wondering what people thought.

4. Using it as a digital source in a 2-channel system
I bought a Monster earphone-to-stereo RCA jack so I can play it through my 2 channel system at home. What settings do you people use when playing it this way? EQ "off"? What about the iPod volume? Should I keep it at one setting and adjust the master volume through my preamp? Again, what about "Sound Check? Any other cable options other than the Monster?

Thanks for any suggestions!