Along S7horton's lines, an alternative would be the Apple TV. I have the previous version with internal hard drive. It's basically a 120gb iPod with an optical output and a few other features.
The iTransport is not user friendly at all in my experience. Soem iPods need constant un-docking and re-docking, some don't have click wheel control, and on and on. If you're set on an iTransport, I think an extension docking cable would be a good investment. You could hold the iPod in your hand and control it, if the click wheel works.
Other than the iTransport and Onkyo, there's a product coming out called the Cyhper Labs AlgoRythm (not a misspelling). It's designed for the HeadFi crowd. It's a portable iPod digital transport that does asynchronous iPod digital through a USB input. It has an internal Wolfson (I believe) DAC and a digital coax output. The USB won't work with computers, just iPods, iPads, and iPhones. Cypher Labs is a joint venture between Red Wine Audio, ALO Audio, and one other group. It seems like a pretty interesting product by a few guys who are pretty good at what they do. It's going to be $579 as far as I know. There was a 6 Moons write up on it, and a HeadFi thread or two. A Google search would provide more info.
