Universal Dock: Line Out isn't really Line Out!

I recently purchased a new Apple Universal dock for use with my Ipod touch. The goal as to access the line out port to hook up to my stereo (driving a stereo through the headphone jack is not the way to go)
I was led to believe that the Line Out capability of the Ipod touch bypasses the internal headphone amplifier, thereby solving all the problems inherent in using the headphone jack (i.e. impedance mismatch, volume too low, etc.)
Such is not the case. With the Universal dock's line out, the sound is exactly as crappy as through the headphone jack, and when I put the output on the scope, it was nowhere near the standard line-level voltage.
Any ideas as to what gives here? I suspect the Universal Dock is not really providing a line out at all....

The iTransport turns any currently available iPod player into a high-end media server by providing a bit-perfect digital audio output to an audio/video system, bypassing the player’s internal digital-to-analog conversion (DAC) and analog output stage. Subsequently, the audio signal remains clean and unadulterated throughout the path, outputting a “bit-perfect” digital stream. The iTransport is compatible with:
All Current iPods All iPod Nano Models The iPod Classic Models iPod Video Generation 5 Also the New iPod Touch/iPhone Models
To ensure compatibility, please make sure your iPod has received all software updates before docking it with the iTransport
“The Wadia iTransport is the coolest product I’ve encountered in some time. If you own an iPod and a high-end system, the iTransport is essential!”- Robert Harley, The Absolute Sound, November 2008
“The iTransport let me hear every detail as readily as did playing [a disc] on the [$6200] Simaudio SuperNova. If there was a difference between the original CD and the digital output of the iTransport, I never heard it!”
- Wes Phillips, Stereophile, Class-A Rating, October 2008
“This is a brilliant product! One that finally lets the iPod be all that it can and should be. It took the imagination and know-how of a firm like Wadia to pull this concept off. The real genius of the iTransport is that it lets you pull digital audio straight off the iPod and route them to a superior-sounding outboard DAC. You’ll have an audio player that not only rivals (but in some cases handily outperforms) multi-thousand-dollar music servers and CD players!”
- Chris Martens, Playback Magazine, August 2008
“Until now, there has been no real bridge between the convenience of an iPod and the high-end audio listening experience,” commented John W. Schaffer, President, Wadia Digital “The goal of making the player a true high-end media server has been hampered by the need to send the digital signal through a portable player’s D/A converter rather than that of a high performance audio system. We designed iTransport to bypass the player’s converter and output stage altogether. When used with an iTransport, theiPod becomes a digital music source equal to some of the finest sounding transports in the high-end audio market.”
Along with turning an iPod into a high-performance audio server, iTransport is one of the first docks to access video content stored on currently available iPods. Similar to the audio section, the video signal is made available via high performance component outputs that provide up to DVD-quality video.
The Wadia 170 iTransport measures 2” x 8” x 8” (H/W/D), making it an easy addition to most racks and entertainment centers. Wadia incorporates a bit-perfect S/PDIF digital output and high-resolution component digital video output, as well as analog audio and video outputs for easy connection with most audio/video systems. Your iPod will be charged while in the dock and the iTransport comes complete with a remote to control all iPod functions.
“I can tell you this much, it sounds fantastic! The dream of the iPod being a true audiophile component has now been realized and the sound quality is limited only by the DAC you own….the iPod through the 170 fooled a lot of people at my place into thinking they were listening to a five figure player!”
– Jeff Dorgay, Tone Audio, Vol #14 2008 (pp. 134-136)

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