I upgraded to iTunes 10.5 and iOS 5 and all my iTunes music became distorted. It still plays fine on my old iOS 4 device but it appears the music on the computer itself became corrupted. A sync with any other device places the bad files on that device.
So perhaps it isn't an iOS 5 issue (in my case) but an iTunes upgrade to 10.5. I realize this sounds completely out to lunch but I have experimented with several iDevices, talked to Apple and don't have any clue how this could have happened.
The facts are pretty simple.
1. All iTunes music was fine before any upgrades
2. I upgraded to iTunes 10.5 and upgraded an iPod and iPad to iOS 5 right after each other and performed a sync.
3. All my iTunes music is now distorted with scratchy, crackling audio at any volume level. In fact it is worst at lower levels.
4. The PC files are corrupted not just the music sent to the devices. Music sounds horrible through the PC speakers.
5. All audio files previously imported from CD's sound fine with no distortion.
Subsequently I created a new iTunes account and downloaded much of the same music and it sounds perfect. There had to be some issue in the upgrade that caused this but it is likely I'll never know.