If your thinking seriously about the iPod Touch then the Onkyo NDS1 digital docking station may be worth a look as it has a digital audio output for connection to a dedicated DAC/Amplifier.

http://www.eu.onkyo.com/products/ND-S1.html

It should make for a reasonably good source at a reasonable price.

Typically the cost for such an audio source would be

iPod Touch 64GB - $399
Onkyo NDS1 docking station - $210 (based on UK prices)
Cambridge Audio Dacmagic - $429

Then of course you will need you amplifier or preamp/monoblock amplifiers and speakers with some decent interconnects and speaker cable.

I also use a Archos TV 250Gb (has a HDD and was found on sale for around $70) along with an original Cambridge Audio DacMagic 2 and very cheap but surprising good Accoustic Solutions SP100 amplifier (again on sale for $75), which I mainly use with the HDTV in another room. The HDD in the Archos TV device can be heard at very low audio levels in the same way that I could hear the 50Hz hum from the original 3 frame powerline transformers than was in the 12 year old DacMagic 2 (which were swapped out for toroidal transformers). But the HDD sound volumes in the Archos TV are about what you may get spinning a CD in a mid level CD player. The HDDs in the Apple iPods will probably not be noticable to most folks though. This is why I have eliminated any mechanical rotating parts and power line 50Hz hum from my current setup and why I am now using a DC Solar/SLA Battery supply. The difference is actually very noticeable (well for me that is) i.e. greater than the difference between playing Red Book PCM CD and high bit rate lossy MP3 tracks IMHO.

One of the best hi-fi system I have ever heard was a Sony SACD reference system about 10 years ago. But the cost of the system was around $50,000 even then.

http://www.avland.co.uk/sony/sacd/sacdproductsbig.jpg

The problem with these very high end systems is that they are so good that the limit of the hi-fi sound reproduction is actually now in the recording studio and the technology of the recording studios from the 1970s (I like my 70s music as most of the music today is really quite tedious to listen to) really wasn't as good as some folks would like to believe despite the re mastering that is now common place. Even modern CD recordings may have waveform clipping when being mastered leading to very high levels of distortion and generate inappropriate harmonics.