Not sure if you are using it with a casset adapter or not but...
When I hook the headset output from my Q to my car stereo I got results close to what you described. The problem for me was that with the use of real speakers (through the air) the phase shifting of the Q for headsets casued almost total cancelation of some frequencies and basicly sounded like crap.
To solve it I went to the Audio Enhancment shortcut under the start menu (dont know where it was for sure on a stock Q - I moved my start menu all around) and picked B - Headset, then turned the suround sound setting to zero and poof, all the phasing problems were gone and the Q sounded great over my car stereo.
As a side note, afterwards I used my headset with the Q and the sound from the media player was flat. Adding the suround sound back in increased the apearent fullness and sounded much better to my ears. It sounded like slight phase shifting on slected parts of the music to give it a ever so slight reverb making the sound seem "bigger" for thoses parts. (sound is a goofy thing to have to try to describe - I give...)
Anyway, good luck. I use mine all the time outside of the limits of the "headset" and love it.
Work recently issued me a MotoQ, I bought a 1G miniSD card for music and put some tunes on it. I am finding that the audio output, via a mini-stereo to stereo female plug to a cassette adapter/headphone adapter w/ any of the players(WMP,TPMP,PocketPlayer) seem to reproduce the sound quality very well. Its like the audio processing hardware is bogging down, vocals get drown out when there is a fair amount of additional noise w/in the song(drums/guitar etc).
Does anyone use the MotoQ as an MP3 player with success?