Can someone do an A-B test: play a good quality MP3 via the CD player, and play the same MP3 file on your iPod/iPhone via the aux input. Then switch back and forth and compare the quality.
For me, the quality via the aux input is definitely much worse than the CD player. It sounds a little muffled and lacking in high frequencies.
I am using an iPod to 3.5mm adapter that provides a line-level out, and my aux vol is set to 1.