I have another proposal. Bring your iPod and your headphones to an Apple store if you have one nearby, or another high-end electronics store that carries high-end headphones. Pick a song you are familiar with that has a lot of intricacies (like, say, something from the Beatles from their studio years) and listen carefully. Then try one of the display headsets, most likely the Bose QuietComfort circum-aural (around-ear, the really big ones) headphones. I'm using these as a baseline mostly as a way of testing whether or not your ear is trained enough to notice a difference or if the ones you have simply are that crappy.
If you notice much of a difference in sound quality, then yes, you probably should get better headphones (though I don't recommend the Bose ones, as they are obscenely expensive and sound quality is mediocre).
I actually recommend
Koss PortaPros, which I have. They were originally released in 1984, and have been in continuous production since then completely unchanged. They're THAT popular. The styling may not be your thing, but the sound quality is pretty epic considering how lightweight and compact they are. If you really can't get past the styling, then the more conservatively styled
SportaPros might be a better alternative (they use the same sound drivers as the PortaPros), though I find them to be a bit boring looking. For the price, you would be hard pressed to beat either of these for sound quality, but they don't have much at all in the way of sound blocking (though I haven't seen a cheap circum-aural headset that did either). Plus, can you say Lifetime Limited Warranty/Replacement Guarantee?
EDIT: Heh, looks like a lot of people buy both the PortaPros and the PX100's mentioned above together, and a fair chunk of the people considering the PX100's go for PortaPros instead. according to Amazon's page for the Sennheisers.
Oh, and
here's a review I posted on Amazon for the PortaPros.