AFAIK, to your latter paragraph, the music will play with whatever EQ setting is set in your iPod over the EQ setting of that same track/album as set in iTunes. That is, if you have your iPod set to Rock and the track/album in iTunes is set to Classical, the Rock EQ setting will play over the Classical EQ frequncy settings, similar to a double EQ setting. At least, that's how I understand it, while the Flat setting will allow for, more or less, clean EQ setting playthrough of what was set in iTunes. There will still be some sound enhancement, but since Flat allows for all frequencies to be at a balanced level, you'll mostly hear the iTunes EQ settings. It's almost akin to turning on Surround Sound, but leaving all the frequencies in the middle.