For me ... 128kbps MP3s sound just fine ... and I'm rather picky about sound. I don't have an iPod (and I refuse to use iTunes), but I do listen to all my MP3s through my car's system, which would be somewhat comparable to your home stereo ... and I don't notice any difference between my car and headphones at work.
I have started to migrate to Ogg and M4A (AAC) ...haven't decidede which to stick with though. They both feature variable bitrates which allows them to get higher quality with more compression.
In general, a 128kbps MP3 will be no different from a 128kbps AAC ... you'd have to RIP the AAC with a max bitrate of higher than 128k to get better quality ... otherwise you'll just get a smaller file. So really, if you want more quality you can rip a 192kbps MP3 and be just as well off ... but again, OGG and M4A have better compression.
With that said ... you will gain nothing regarding quality by converting your current MP3s to AAC ... there's no way to gain back any quality that was lost in the original rip. In order to gain quality, you'd have to re-rip the CDs at a higher bitrate.