If you just plug the headphone jack into a line-in on the receiver, there will be a level mismatch, and you'll have to be careful with volume settings on the stereo and the iPod to get the right speaker volume. This may result in some distortion/hiss/lowering of audio quality, and when you switch back to radio or CD, you'll have to be careful to switch your volume setting back.
I'd recommend getting a dock (even a cheap knock-off on eBay); the 3.5mm output on the dock outputs at line level, so the above issue is eliminated.
You can plug in safely in to an AUX input. I wouldn't plug it into a phono input.
Quality is average.
There are specific AV cables for ipod/iphone that plug into the dock port, I'm no sure if the sound quality is much different, though if you use it alot, then you could get the dock to stand the phone up.
I bought a couple of dock connector to rca adapters and those work really well. I think I paid less than $5 for those. One even has a USB plug to charge it while it's playing.