soundwise, the ipod video 5g had the best sound out of an ipod i've ever heard. nothing comes that close. the iphones come close though. they use different DACs. the later devices use cirrus audio dacs and the video used wolfson dacs.
not to say that either of the companies are bad but the wolfson was much more high end than the cirrus ones they use now.If you have good headphones, use the flat eq or just turn it off.if you are very serious about audio quality, visit head-fi. they will you just how to get the most out of your music.Mainly, the best audio quality cna be gained through using the line out on the ipod and then feeding that to an external amp which then powers your headphones.