On my iPod Nano 5G ALAC files sound the same as AIFF. I have never heard of iPods giving worse sound with ALAC than AIFF. Are you sure you encoded them in ALAC and not AAC?
I have had my MacBook connected to my DacMagic through Toslink. I had encoded 5 tracks (vocal, jazz, classical, rock, pop) in different formats: mp3/128, mp3/192, mp3/320, AAC/128, AAC/192, AAC/320, ALAC and AIFF. All encoding was done with error correction on. I put all versions in a playlist and let them shuffle and scored the sound quality. I let someone else take count of which version was playing. For all 5 tracks I (nor the other person) could hear any difference between ALAC and AIFF.
With the different compressed formats I could hear some or more artefacts. They were the least obvious with spoken word.
It takes some time but it is quite a nice little test and almost double blind.
The best thing about ALAC is when you use an Airport Express. Because the protocol uses ALAC to send from the computer to the AE the computer doesn't need any processing power to send the files. All the processing was done during encoding.