I suppose the one advantage to doing this as opposed to connecting your iPod directly to your audio system would be the interface. Interesting that Microsoft is providing the means for enabling this connection...

"Wouldn’t it be great if you could play some of the audio content stored on your iPod through your Xbox 360 so you could enjoy it over your state-of-the-art entertainment system? There is a relatively simple way to do this, with references by Microsoft to the iPod on the Xbox 360 support system even providing some of the cues."