You'll have to tell us first what you don't like about the iPod touch. Actually surpassing its output quality will be your first problem. Your second will be deciding where you want to sacrifice.
The age-old good choice is the Sansa Clip. You can rockbox it for great EQ and gapless playback, and its output is overall very good (some leanness in the stereo image, which is more compressed than the iPod touch). Apart from that, you will be hard pressed to get a good system. Even the Clip has more background noise than it should.
Sony's have more and simply don't have good outputs in comparison to the clip or the iPod to sustain heavy loads from dub step and trance with earphones in. Cowons are getting better. They used to have pretty poor outputs, but now have outputs as good as the Sony machines do. Their EQ system is quite decent as well.
Or, if you just want to spend a few bucks, get eQU for your iPod touch and enjoy a pretty good parametric equaliser. Better yet, Equaliser. Both can be had for 4-5$. And, with EQ heavily engaged, you'll be able to get the iPod touch's output to engage 2nd and 3rd order distortion to sound more like a Sony MP3 player.