you need a mixing board to preview/cue music.
this is regardless of whether you use a pair of iPods or a vinyl/laptop/cd combo. if you've ever seen DJs at a club, they might use a monitor speaker to listen to the output and use a pair of headphones to preview a track and sync up the beats. you can find something like this at places like guitar center. you might even find a decent budget mixer/pre-amp at radio shack.
there was an article in Wired a while back that featured NYC DJs that only use iPods at their raves.
i don't know of any solution where output and preview is handled by software. then again, i'm no pro DJ but i know a few that are and i could probably ask them but they'll probably say the same thing.