I am going back to 4.7, as I didn't have any problem until 5.
What is happening on my end is that Version 5, both in Mac and Windows, erroneously plays AIFF files with 8-bit sample sizes, blurring the sound and throwing in a lot of static. MP3 files encoded from these 8-bit files in Version 5 also are overrun with static. These files are those I previously recorded using my old G3's built in AV card and Sound Studio, and they have never shown any problem playing before, and they still play perfectly from the iPod out of its speakers, but not while connected and playing through iTunes 5.
The problem for me seems limited to uncompressed files with 8-bit sample sizes. Files I've recorded using my G4 and a USB input with 16-bit sample size do just fine. I haven't yet attempted to use Quicktime or Sound Studio to resample the 8-bits to 16-bit and see if iTunes 5 plays those resamples OK.
On my work machine which is Windows, I just uninstalled iTunes 5 and used a 4.7.1 installer I kept, and my 8-bit AIFFs just sprang back to life.
If this problem exists in both Mac and Windows versions of iTunes 5, then I think it goes deeper than a preference file problem. I have no idea what change to the algorithm would necessitate abandoning 8-bit sample sizes, but that seems to have been done.