Clean ripping is your first priority. Use EAC, not iTunes. Second, the file size depends on the size of your iPod, and the number of times you want to reload it. Heck, use any lossless format(wav or Aplle Lossless) for best sound, but they're anywhere from 50% to 500% larger than your MP3's. If that doesn't matter, or if you are willing to reload your iPod with another set of tunes from iTunes, then go for it. Me, I use my 40gig iPod for portable use only, although with very good phones and a headphone amp. A 224AAC song is very very close to wav quality for a fraction of the size, but the fidelity may very well show itself on a home system.
And you MUST use the line out from the dock or third party line out accessory. Using the headphone out will cause distoriton (if iPod is too loud and over driving line input) or hissy (if iPod is not loud enough and not driving line in enough). Realize that if you are using an iPod shuffle, the line out is a misnomer, it's a headphone out too.
