The audio quality hasn't dropped at all. I have an older NWZ-A818 which I love, but the newer ones are every bit as good. The only thing that I would do if buying one of the new models would be to buy some better earphones. The packaged ones are pretty basic now.
I wouldn't bother with the S series though, personally. The new E-series ones are just as good but without the (poor) built in speakers and they feel a bit more solid to me. With the current double your memory promotion you should be able to pick up a 16GB E-series for the price of an 8GB, leaving money left over for a decent pair of EX series earphones.
Alternatively look at the flagship NWZ-X1050 (16GB) or NWZ-X1060 (32GB) models. More expensive but they come with quality noise cancelling earphones and the sound quality is superb.