Regarding your iPod, if you use a cable with a 3.5 mm jack on one end and RCAs on the other end, you are using the iPods built-in DAC. The iPod's DAC isn't very good. If you are taking the digital output of your iPod and connecting to a digital input on your SACD, then you are using the SACD's built-in DAC. Notwithstanding the DAC, a lot of your sound quality depends on the tracks on your iPod. If you are playing AAC files, the sound quality isn't going to be very good.
If you are feeding your SACD player's digital input, then the quality of the analog output depends on the SACD's player's DAC and analog output stage. There are some SACD players and CD players with good DAC's and analog output stages, but their analog output is often inferior to a standalone DAC.
You need a good source, i.e.; the analog output that will go into the preamp's input, then you need a good preamp to amplify the signals, and then you need a good amp that will amplify the preamp's output to a level that operates the speakers. The sound comes from source, then into the preamp, then the amp, and lastly through the speakers. Poor sound at the beginning will merely be amplified through the speakers and will sound poor. Good sound from the source, amplified correctly, will sound good through good speakers in a room with good acoustics. Great sound is a little more complicated but follows the same concept.
To answer your question, if the DAC in your SACD/CD player isn't very good, you will be giving up a lot by not having a better DAC. However, every upgraded component should improve the sound quality. The crummy analog output of an iPod (yikes) will probably sound better through a better system, but you aren't going to get the sound quality that you would with a better source.