As the bride and groom, no matter how much you like the idea of being a DJ, at your wedding you should not be managing a playlist. Let someone else oversee your iPod so that you don’t have to be running back and forth to make sure a good song – or in the instance of special dances, the right song – is playing.
Putting together a playlist for your ceremony and cocktail hour is easy, but a reception playlist for dancing is a little more difficult. A professional DJ or band can feel the crowd and know when to play certain songs to get the crowd on the dance floor. The playlist you create may not get the job done and you don't want to be surfing through to find a better song.
As for sound quality, your at home iPod speaker is probably not sufficient enough to fill a hall, so research larger speaker systems to ensure that the music is loud enough.
I would limit the iPod to the ceremony and cocktails and then spend the money on a professional for your reception. It's still less than hiring someone for the whole wedding. Maybe he or she will let you use/rent their speakers for the ceremony and cocktails.
And if you're not sure what to put on the ceremony, cocktail or reception playlist, there are plenty of wedding Web sites that offer suggestions. Or you can hire a company to create a unique playlist just for you. AudioStiles is one company that can create a playlist for you. You can talk to their music experts about what you're looking for and they can either give you the names of songs or upload a complete playlist to your iPod.