Apple dumped DRM on their music a couple of years ago, if you buy it online (or use iTunes Match) it's encoded with your name and account details but there is no physical reason you can't copy it off and give it to a friend. Legally it's a licence agreement you're breaking.
Long story short, you can use the iPod, an SD Card, burn some CD’s (or even a Data DVD full of songs I believe) and use that without issues.
If you use iTunes already, are comfortable there and want to continue using that you can create a play list as normal then just drag those songs to an SD Card. Dead simple.
The MDI Interface
The MDI interface is great for use with an iPod, in fact I purchased an iPod classic for each of our cars as we got them so I could load my entire library onto that and just leave it in the car. I just pull it out and re-sync it from time to time to capture any new play lists or music I might have acquired.
But your problem is the lightning connector (8 pin connector) vs the older 30 pin connector used on the older iPods. You can get this adaptor from Apple (or a knock off from eBay):
Lightning to 30-pin Adapter - Apple Store (Australia)
or this one if you have a case:
Lightning to 30-pin Adapter (0.2 m) - Apple Store (Australia)
Theoretically this will provide both power to the device AND audio back to your head unit… but in my testing with my eBay knock off it never worked as well with my iPhone 5.
Plan B is to get a different iPod dedicated to car music with a 30 pin connector.
Bottom line I think that an iPod full of music works better than an SD card full of music through the menu system, especially with larger libraries.
Bluetooth
Bluetooth steaming tends to polarise people. Some people think it’s utter crap quality and hate it, others think it’s perfectly fine. I fall into the later group. Lately I find myself using bluetooth to stream audio from my phone rather than the iPod. For me the iPhone tends to be synced far more often so the music and playlists are more up to date and it’s already sitting in a hard mounted dock with permanent power so I don’t have to worry about battery.
If your phone already had the audio on it, why bother with another device?
If you want do want to use you’re iPod over bluetooth you probably want to think about how you’re going to power it. Again, if you have an iPhone why not invest in a decent hard mounted dock with permanently wired power and ensure your phone is charged, meet your legal requirements for in car use and get to listen to your music
AUX IN
Yes it works just like plugging in headphones but just feels like the dodgy cheap way to do things. (like those old school headphone to cassette adaptors you could get in the late 90’s for hooking up your discman to your tape deck
).
You still need power, there is no control over what you’re listening to via the head unit… Just not a fan at all.
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