I burn all of my at "Apple Lossless Format". The standard compressed mp3 format is great for earphones, but when you amplify it through a stereo it does not work well. The downside is when you burn songs at full "resolution" they take up about 5 times (or more) as much space. I bought a 30GB Ipod when my Nano was stolen, so I would have as much room as I could ever possibly use.
I am at the office now so I can't look to be exact, but to change the setting go to "Preferences", then there is an "Advanced" tab somewhere relating to Importing. There you can pick "Apple Lossless" which basically imports songs at the same fill size they are on the CD. One downside is that I do not think you can import from iTunes in that large format, so you can only use it on songs you have on CD.
There are some additional Ipod settings recommendations at the
www.2wheeltunes.com" site, I believe under FAQ that may help you get better sound as well.
Good luck, Doug