^^Should work with Iphone, but it'll say "Device not designed for Iphone... Turn on airplane mode to prevent intereference, Yes or No" on your Iphone. At least thats what I get whenever I connect my Iphone to any device. Just hit No and don't worry about it. They are just warning you the phones signal could cause intereference with the device you're trying to play the music on, which I have yet to experience.
I hear ya on cd's, to keep changing them, getting scratched, gets old real quick. Ipod is the way to go. I went with a D3 though, not for the nav, but just to see all the titles on the screen. If you don't have the scratch, that looks like a good way to go. If you don't mind fm modulators, Monster Cable makes the best sounding one, plugs into the cigarette lighter and the dock port of the Ipod/Iphone and charges. I use it in my work truck and like it alot.