My ipod sounds great in my system, I have a Sony Xplod head unit with an aux input, along with an amp in the trunk for two 12 inch subs, it's loud. The great thing about my system though (compared to using my stock set up though, where I had my subs running off my rear speaker wires) is now that they are powered by a sub output, I can have a lot of highs with a lot of lows, instead of being directly related, where If I have a lot of lows, there are little highs, and vice versa. I like having a lot of highs but still being able to feel the bass.
And using a lot of the songs I listen to (techno and trance) it seems to fit the bill nicely and to me, it sounds great.
But like previously mentioned, your output is only as good as ur input, garbage in, garbage out. Mp3 (compressed) isn't exactly the best thing to use...