ipods are great for this. i have a 4g nano, 5g video, and 6g classic, imo they all sound quite good through the line out, but to me the 5g sounds the best. they all seem to sound better through the line out than the headphone jack, especially the nano. i picked up my 5g (60gb) for $50 on craigslist and the 6g (80gb) for $75 on craigslist, so check there. ipods are everywhere and a lot of people don't realize how much they can get for them and/or really need money so they can be had for quite cheap if you look around. my car's head unit has a usb port with ipod synch, so it charges the ipod while it's in use.
EDIT: if your head unit only has a 3.5mm aux input, you can get an LOD (line out dock) cable for your ipod, which will allow you to connect your ipod via the dock port to the 3.5mm aux input. this gives you a true line out signal and will be functionally identical to using the ipod's docking cable, except that it won't charge the ipod while in use and you must use the ipod's controls.
alternatively, the sansa fuze sounds great through the headphone jack; it gets a lot of praise over at head-fi and has expandable memory via SDHC cards.