I use the jack for my MP3 player (not an iPod) and once I figured out the equalizer and sound settings, it sounds OK going through the stereo (which has its own settings available too - doubling up on EQ settings can yield less than desirable results). You definitely need a higher quality patch cord. I tried one from the RatShack (1ft RatShack standard cable) and it was very low quality. I bought some plugs, some higher quality cable, and made my own. It did help the sound Q. The big thing was to come up with a "custom EQ" setting in my MP3 player and save it as '4Runner' so I can just change it to that setting when I am in the truck.
You just have to also remember that sat rad is not CD quality, and be sure to use as high a quality patch cable as you can, and it will be OK. Will certainly be better than using any form of FM transfer or modulation.
I used a Toyota/Lexus/Scion translator interface to connect my Sirius directly to my 4R's navradio and the sound Q is better than FM, but still not CD quality (and never will being as it is a sub-CD quality source to begin with). It is worth it tho, since the navradio can control my Sirius and all my tunes outside of my MP3 player - a Samsung P2 8GB w/touchscreen.