But for me, I figured the main reason for MP3s is the portability. For some it might be compressing several CDs (which you own rightfully ; ) onto one CD-ROM, or being able to email yourself a song, not to hook to a home stereo system. But I wouldn't imagine that in regard to a PDA that the MP3's quality would be the top priority, given a song/file is audible. I've seen a few people with high-end Bose headsets attached to their MP3 players, but for the most part, the quality of the MP3 playback would probably be limited by the $25 headphones themselves.
To save space, I rip/save/convert my favorite songs at 96bpm and have put the same song "recorded" at 160bpm and not noticed which is which - of course on a little Sony Clie with those $25 earbud headphones. But with a 128M memory stick, I get 40-45 songs. It's not an iPod, but it's a lot more portable, not having to have an MP3 player and PDA. Now to get a phone added to that mix...