If there is no other radio station on that particular frequency then it is great quality. If there is a radio station on there then it over-rides it but when it is in between songs on your iPod you can hear the exsisting radio station coming through.
The transmitter lets you select four different frequences so it should never be a problem. I agree the lack of AUX jacks in the cars I use meant the FM transmitter was my only option.
iPod Touch Stats: Audio - 2.22GB, Video - 9.7MB, Photos - 25.2MB, Other 22.8MB, Free Space - 5GB