I'm in the same boat with my GTI Pirelli. The dealer told me exactly the same: two options: $700 or $2200 (premium), premium does not work with Iphone 3g.
Personally, I think $1500 to $2200 is quite steep for bluetooth functionality. I am also considering VW Accessory 000 051 433 C, which is essentially the Bury CC 9060. Great functionality, the only downside is that you have another device/screen in your car rather than using the RNS510 screen...
Have a look at page 17:
http://www.volkswagen-zubehoer.de/fi...h%20081208.pdf
Black VW Golf Mark V GTI Pirelli - RNS 510
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