I've compared mp3s at 192k versus Apple Lossless on my iPod and I couldn't really tell the difference. I attributed this to the DACs in the iPod as well as the quality of the earbuds, but mostly the DACs. Now I did this comparison using my Nano and maybe the Classic has better DACs.

I experimented with the iPod connected to my 990 via its analog connection (not the headphone jack) but it was pretty poor quality. I don't even use my iPod for background music due to the poor sound quality. That duty is left to iTunes via my router to a Linksys Music Bridge connected to the 990 via an optical connection.