In reply to gethin_allen:
Wiggling has no effect and I took the front of the stereo apart to examine the contacts on the jack plug - it definitely fits right in and contacts properly.
If you're right about the soldered joint then at least I have a workaround in that earthing the iPod through its charging cable gives me decent sound quality.
In fact come to think of it the sound from the aux input has always been mildly substandard - when I installed it I compared the same piece of music on CD and mp3 and the CD was much richer, so perhaps this is just the final stage in the failure of a joint that has always been suspect.
To be clear on your proposed root cause, are you suggesting that the joint in question is part of the circuit that connects the shield part of the audio cable to earth, and that I am able to re-establish a connection to earth via the charging cable?