I think it's awesome that you're doing this for your Dad. Couple of questions:
1 - Do you already have an iPod for your Dad? If so which one? If not besides music what features are you looking for, if any?
2 - Does your Dad already have a stereo system? If so what sort of connections does it have?
All iPods have a function called Voice Over, which makes it easier for visually impaired customers to use them. With arthritis, if it's really bad, I'm thinking that either an iPod Nano 6th Gen or an iPod Touch might be the way to go. From there it's just a matter of the stereo connections, or selecting a decent dock that will work for your Dad's needs.
Hope this helps.