The BeoSound 8 has it's own sound card inside. Bang & Olufsen recommend you switch your EQ off on your iPod, iPhone etc.. to get the most out of your BeoSound 8. So it's your iPod thats causing the distortion, not BeoSound 8 me thinks. In fact, if you use airport express, the sound is even worse as the sound card in that is absolutely horrible.
BeoSound 8 was designed to be a stand alone system. If you would like more ummf out of your music and use a subwoofer, that is what the other sound systems were built for.
If B&O had added outputs and wireless tech etc, BeoSound 8 would be priced a lot higher.
Personnaly, I love my BeoSound 8 and have full respect to Bang & Olufsen to launch a product at this price range.
In short, well done Bang & Olufsen!!
Just my 2 cents :-)