titaniumducky said:
I think your stereo just replicates the errors caused by lossy codecs better than your headphones (meaning that your stereo merely reproduces sound better).
I guess we neglected to ask you, titaniumducky, when you say that the sound is muted and the vocals are screechy, how bad exactly do you mean it sounds? I guess without starting a flame war, I think most people would agree that when AAC at 128k is working correctly, you should usually get sound that sounds fairly close over good speakers to the original. If you have good ears, you will hear differences, but if it sounds dead wrong right from the start, it sounds like something else might be wrong.
Occasionally I've had specific cd's that rip in very poorly for reasons I don't understand. But this was 2 cds out of about 220. So if all of yours do this, I would try:
1) Rip in the new Apple Lossless and see what you think
2) Assuming you don't have the hd space to spare to rip everything that way

, try higher bitrate settings like 192 to see if you like it
3) Try the MP3 rip option...now I personally definitely think 128k MP3s have evident distortion, but I would be curious as to the possibility that there's something corrupt in your software and it is not ripping the music correctly...
Also as for the sound being flat, the iPod I've noticed definitely doesn't seem to produce a flat signal, in the sense that the sound equalization sounds off with comparison to the CD. I think iTunes does this too, and tends to weight the music towards the low end and have suppressed treble. Try playing with the equalizer (it is the leftmost of the three buttons at the bottom right of the iTunes window).