Comment A few options.. (Score 1) 369
Apple has a few options to choose from:
Apple's 30 pin connector already has audio out. Why not just remove the 3.5mm jack and either provide an adapter that converts the 30 pin male to a 3.5mm female or have headphones that come with a 30 pin connector.
Someone mentioned bluetooth. I like the idea of going cordless.
Another option that I like, since we are talking about modifying the standard 3.5mm jack, is to reinvent an external audio connection much like Apple's MagSafe power cord. It would significantly reduce the space taken up by a 3.5mm jack since the audio magnetic jack would be outside the device. An adapter could be easily created for 3.5mm headphone jacks too.