Turns out that older iPods DO have better sound quality. I thought so. I've been listening to a lot of music in the car, every day, and it seems that my old iPod 3rd Gen (with buttons) sounds much better than my 4th Gen. iTouch that's so much faster.
I recently replaced the battery in the old 15Gbyte iPod and it runs great. Ifixit.com still sells stuff for those models, and they even through in the tools for free.
After listening to the same old playlists for a few days, I noticed that the sound was so much richer, the bass was bassier, and I was hearing a lot more 3D and cross-channel dimension. These old audiophile ears don't lie, especially when it's pumped into a car system. Thank goodness I found this site b/c I didn't want to have to get out SoundForge and do the analysis myself.