Here is a good thread that discusses the difference between a PLAY:5 gen 1 (which I suspect you have) and the gen 2, and the Sonos Five, all of which have line ins.

Assuming the headphone output isn’t broken on the iPod, and the line in is not broken on the Sonos device, I suspect you’re working with warring volume levels. The Sonos is designed for a standard line level input, not a variable input, so I would set the volume at 50% on the iPod, then deal with the line in settings. 

You could, if you suspect a hardware failure on the Sonos, submit a system diagnostic within 10 minutes of experiencing this problem, and call Sonos Support to discuss it.

There may be information included in the diagnostic that will help Sonos pinpoint the issue and help you find a solution.

When you speak directly to the phone folks, they have tools at their disposal that will allow them to give you advice specific to your network and Sonos system.

@Progger 

Hi Gregg,

You have to use a 3,5mm stereo jack on Play5s input. 
And for best quality and usability you have to configure line in level and autoplay in room settings via Sonos app. 

You need to download the Sonos S1 app, add the S5 to the app, then go into Settings and set Autoplay to On.  Then you can use the device a s a standalone speaker playing from the line-in device.