Don't know what kind of headphones you are using, but my Sony headphones can crank louder than any person would ever need them to be at, so I am thinking it might be the headphones rather than the droid. Do you have another source you can plug the droid into? Computer Speakers, a different pair of headsets, your car, etc...
And just in case you are a noob
make sure you have the volume bar cranked up all the way by pressing the top button on the right side of the droid.