1st and 2nd generation were pretty mediocre (the Archos sounded WAY better at the time, but the interface and form factor made me buy the iPod anyway).
1st-generation shuffle is indeed unsurpassed AFAIK (unparalleled bass response under load), but my 5th-generation iPod's line out gave my Cambridge Audio CD6 a run for the money on lossless material - not high-end, but definitely most acceptable.
I haven't been able to test the current crop, yet. Apple has reportedly switched audio chips as of the Classic/3G nano.