I hope I don't sound like I'm repeating myself, but I want to try and clarify what my experience was with iPod and DST.
Note: I have my iPod set up to auto sync as opposed to manual when hooked up to the PC.
I don't believe the iPod detected DST on it's own. The iPod's main time display automatically changed ahead one hour once I hooked it up to the PC, which sync'd the iPod time from the PC system clock which was already in DST.
After disconnecting the iPod, it's alarm clock was still one hour behind. I had to toggle the ipod's DST setting in the alarm setup section, to 'on' in order for the alarm clock to display the same time as in the main display.
So, it would appear to me that the only place iPod would know about DST is in the alarm settings where you set DST to 'off' or 'on'.
To get times to be correct, it required a two step process. I'm not sure how it would work when manually managing the iPod.