Ok, I did some more testing this evening.
First I checked that the EQ is off on both units.
I selected a variety of music.
I used two different sets of headphones:
1. Shure E3c, audiophile quality
2. Sony sports headphones
Same results in all cases. The 2G is less enjoyable, to me, anyway. It has a little more treble detail but the lower midrange is just missing in action. Piano makes this most obvious. The weight and roundness of the notes is completely gone. What a disaster.
Oh yeah, the bass of the 2G has more pop to it but I don't think it's deeper than the 1G. The bass of the 1G has more body.
Every time I went back to the 1G it was a relief.
Could it be just this one 2G unit has a problem? Or this one manufacturing run?
I suspect that in their desire to extend the playing time of a given battery, they reduced the power going to the playback so much that it cannot really support playback of the music adequately.
I love the look of the 2G. It's so clean, and it does not require a case like the 1G does. and it is a bit quicker and has more treble detail. But what good is it if the overall sound is not up to par.
NOW, where can I get some "new old stock" or refurbished 1G nanos? A second one for me and one for my nephew.