oh i can definitely tell the difference between a 44.1kHz 16bit or higher sampled wav. file vs a 128k, 256k, and 320k mp3's. but the acoustics in the car isnt that great nor are the speakers or wiring or HU in my car so this is why i usually just listen to mp3's in the car.
for real listening i dont like mp3's.
there are main 3 reasons why the ipod is quieter through the 3.5mm aux input on the car vs playing them directly off the mp3 CDR.
1. the ipod should not blow people's ears out when played.
2. the ipod is running on limited battery power so amps need to have minimal power consumption... should be just loud enough to power high impedance headsets (some studio headsets).
3. on the car side, cheap aux input pre-amps are generally noisy so they dont put much amplification.
i am sure 90ST can elaborate more on impedance.