Yes my fake Chinese made, ipod ripoff, broken and bruised mp4 player does this out of the box can you do it ipod. Here is what I am talking about. Can your ipod show lyrics when the songs are being played.
Here is how my mp4 player does it. Just go to this site download the Lyrics II plugin for winamp and install it and play a few mp3's then look in the program folder of the Lyrics II plugin for the .LRC with the same names as the mp3 that you played. Copy both of them on to the player.
And when the mp4 player is playing just press the and hold the menu button and bingo there comes the lyrics in sync with the songs.
Can you do that apple, Or do I need to by another accessory for you to do that.