I have a Yamaha RXV2700 with the compressed music enhancer and I was surprised at how well it works. It seems to enhance the higher frequencies and make the music sound more full. One interesting thing to note is that if you enable the music enhancer when the source is not compressed (CD or DVD) it sounds awful.
Compressed music is never going to sound as 'good' as the source, but having the convenience of 160GB ipod on a dock linked to your system is worth the sacrifice as far as I am concerned.