There's two big challenges making an iPod work with a quality hifi (well, three if we worry about the quality of the files on the Ipod, but that's for another day)
#1- If you use the iPod's headphone jack to connect to a Line input on your receiver (Tuner, AUX, Tape, etc) you're still listening to the somwhat aenemic (sp?) headphone amplifier in your iPod...which means turning the iPod's volume all the way up to get any kind of output from the system.
#2 How the heck do you control the thing? Walking up to the iPod (which is of course lying flat on its back on top of your receiver) and using the little wheel gets old.
So go out there and get yourself a decent iPod dock with some line-level analog RCA outputs. There's a ton of them out there that not only offer a MUCH more robust analog output, but also will provide a remote control to operate the little beast. I own the Marantz dock, which sounds great and even has a video on-screen display output so I can browse my music on my tv screen. My other favorite is built by DLO (DIgital Lifestyle Outfitters)...and that on even lets you use your iPod video to view pictuires and movies on your tv!
Either way, get that thing diconnected from your phono input and enjoy!