Either system offers the same sound quality as long as you don't use the earphone plug on the i Pod and only use a cable that connects to the dock connector on the bottom which gives you a line level output signal.
I don't understand why you would want the glove box solution which sounds very cumbersome and slow when an aux. plug in the console comes standard. I would think either get the factory installed 6FL option which makes the integration with i Drive seamless or just use the aux. plug in the console (console aux. plug is for sound only, no i Drive integration).
The sound quality will not be great with most i Pod file formats because they're highly compressed. Some people use less compressed formats or the WAV format which is not compressed at all but the less compressed the file the fewer songs the i Pod will hold.
The bottom line is that if you reduce the file size from 30 mg. to 3 mg. you'll have a reduction in sound quality. It's a balancing act between convenience and quality.

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