
I went with an iPod Mini with a Dension ice>Link: Plus to play my iPod music through the existing car entertainment system's CD changer port. DensionUSA.com

The integration gives you two options.
One option is for the song title and artist to display either on the instrument cluster MID or on the NAV screen. Five play lists are selected using the radio, as if they were the first five CDs in the six disk changer. (Selecting disk six puts you in programming mode for the ice>Link.) You get no use of the iPod buttons, which means you can hide the iPod in your trunk, or run the wires to the glove box, etc. It�s a little cumbersome at first to make music selections, but of you want the integration to the MID or NAV, this is the way to go.
The other option is no integrated display. You have use of the iPod buttons and make music selections through the regular methods on the iPod. But the steering wheel controls for next/previous as well as FF and RW work. You may need the iPod to be conveniently placed so you can access it. (I like to set it to shuffle and forget about it, and being able to skip songs with the steering wheel buttons is enough control.)
Both display the music information on the iPod, and both allow use of the steering wheel and radio �up� and �down� buttons. Both require removal of the factory CD changer, and both charge the iPod.
Installation isn�t too difficult. After the NAV drive has powered down, disconnect the negative terminal on the battery and remove the NAV drive.
Remove the trunk trim panels and access the CD changer area.
Unplug and remove the CD changer and you are ready to install the ice>Link.
For BMWs without DSP, you simply plug in the ice>Link in place of the CD changer, and hook your iPod to the other end. For BMWs with DSP, you need to bypass the signal through a digital/analog converter. I purchased the ice>Link and the DSP module from Tom at European Auto Source and it just takes a few minutes to put together.
(Tom's customer service was excellent and thankfully he provided swift answers to all my questions.)
Now it�s ready to test out. Here is the iPod display and the MID display. (Eat for Two by 10,000 Maniacs)
Here is the NAV screen display. (Jubilation �Live- by Anything Box)
I replaced the CD changer bracket and velcro�ed the converter to it. That converter takes 12V power so I connected it to a switched power source so it draws no power when the car is off. The ice>Link cable runs to the passenger compartment then to the center console following the same route as my BassLink wired remote. (Link to my BassLink install page)

I had the iPod on a bracket made from acrylic, held by tension (no drilling).
But with the song information showing on the NAV screen, the iPod doesn't even need to be accessible. I moved the wires to the passenger side and up to the glove box, so the iPod is hidden from view.
As a side note, the E38�s CD changer went into the E39 since we never put one in that car. After getting an extension cable for the wiring (84-11-0-141-977) it was simple plug n�play, but it wouldn�t fit in the concealed trunk compartment location. Bending some acrylic to make installation brackets didn�t take too long.
This was a short lived solution... a couple months later, I had to get another ice>Link to put in the E39!
Thanks to BimmerBoard.com friends: sealbeach740, LA-Sean, and Dave Clement for technical support during the install!
Thanks to BimmerBoard.com friends: Jim Cash and John Carey for technical support on the E39 CD changer project!