The other thing to check, and I know this seems stupid, but make sure the volume on the iPod touch is turned up. Apple stuff has a smart jack that can sort of "remember" the device that it's plugged into. If I plug in my headphones with the mic so that I can listen to music and receive phone calls, the iPhone sets the volume to around 50%, but If I plug in my AUX cable the volume automatically goes back up to 90%, and likewise, the volume goes to 100% when it's paired to bluetooth.
So it's entirely possible that the iPod is turning the volume way down on the player itself... just a thought.