One of my co-workers was called on to the carpet for splicing his headset wire, affixing a plug and then attaching and listening to his iPod while flying. While our SOP's do not specifically say "no" (nor should they have to), I understand that when he left the DFO's office it was very clear to him...stop doing it or find a new job! This at a major airline.
For all the reason's stated by other's...not a good idea.