You shouldn't have any problem with holosync in mp3 format. You can go to the holosync chat board,
http://p098.ezboard.com/fcenterpointefrm16 and search formats, ipods, etc.
Personally I do find a quality difference listening to the CD player and listening from my Ipod although the results seem pretty much the same. The most important thing seems to be good quality headphones that cover the ears.
All the best