I am somewhat of an audiophile and have owned a variety of high end gear including Mac, Pass, Usher, PS Audio, Manley, etc. Have experimented with nearly all technologies including tubes, hard-drive based systems, SACD, and so on. Have had vinyl for a good while but that's on hold now.
My current setup includes Meridian active speakers, which are good enough that they pulled me out of the constant upgrading game, for which I am thankful as it gets pretty crazy. I went through about $100k in electronics over 10 years. The Meridians cost as much as a new economy car, so they'd better be good.
To OP: in your iPod, do you use lossless audio?
In pretty much all cars I have heard (stationary!), the audio is actually BETTER than home stereos unless you're spending a lot of money at home, and Im not talking receivers. The enclosed environment, combination of hard and soft surfaces, MUCH smaller space (think headphones on the other end), contribute to a listening 'room' that is actually very sound friendly.
Unless...
You screw it up with a supremely mediocre system and then remove the tweeters! Yes folks, the audiofools at BMW decontented the standard stereo by (cough, hack) REMOVING the effing tweeters (what, $10 each?) entirely! So you have not-so-good midrange drivers trying to replicate the high frequencies (as well as doing their own job) and failing miserably.
I have the stock stereo in my X5. I am NOT an audiophile on the road, I am a driver. Much of the time I don't even have the system turned on as I like to listen to the engine, road sounds, etc. But when I do turn it on, such as on a long drive with cruise control on, this thing is pretty bad. And comparing to the base stereo of my ML320, that was a lot better even though nothing to write home about. But a moving car is NOT the place to evaluate a stereo anyway. Too much noise... proper listening to a stereo demands an otherwise tomb-quiet environment. However, the irony here is that the X5 is pretty damn quiet, which actually promotes attentive listening, and then they bugger it up, in the standard stereo at least...
I may be upgrading the X5's speakers in the summer. If it works out well, I will post a DIY. In the meantime, I run the treble all the way up and it helps a little.