I'll say this for the ATS-505, the audio quality on FM with a decent pair of headphones is very good. I use the ATS-505 to listen to streaming music from my computer (via a Whole House FM Transmitter). The resultant audio with headphones is clearer than my Kenwood stereo tuner/amplifier, SRF37 Walkman, or ipad/iphone. I hadn't expected this, and was pretty amazed. I'll also second what boombox said about the AM selectivity. Pulling out distant signals from strong local ones has been pretty easy.
You're right, it does sound very good on headphones. SWBC sounds pretty good also.
I was also quite surprised at the MW performance when using an external loop. It's too bad Sangean didn't put the same loopstick in the ATS-505 that they put in their SG-700L analog AM-FM-SW-LW radios -- one millimeter or so extra thickness makes quite the difference.