That Apple TV idea is extremely cool too, but more expensive and requires a TV.
I just wanted to share with other Audiogoners a use for your ipod that is inexpensive, works great and is an alternative to a $2000 music server. As I said, it will not sound as good as a high end Wadia cd player or running it through an external DAC, but is very adequate for non critical listening. I have plenty of more expensive toys for my critical listening!
I also hooked up my Ipod using a y connector from the headphone jack of my Ipod to the back of my preamp. This was before I purchased the W2. I was so unimpressed with the sound that I never used it again.
The imaging was really hazy with no dynamics and too low of gain.
The Audioengine W2 transmitter plugs into the Ipod using the lineout(dock connection)rather then the headphone input.
The receiver plugs into the wall outlet and a Y connector goes from the receiver to the preamp. After hooking up the W2, it had a totally different sound compared to the hookup from the ipod directly to the preamp. Sorry, I can't really explain why the sound was that much better, but I know it doesn't use a separate DAC. I don't know, maybe it is a synergy thing with my system. Everything seemed to click in perfectly.
I experienced a similar effect when I switched to a line out dock connector from my Ipod to my IQube headphone amp
from a plain mini plug connector that plugged into the Ipod headphone jack.