A system with a direct FM transmission into the antenna socket would be your answer, that way you wouldn't loose any signal quality and you could assign a specific button on your radio to it (most come with a choice of frequencies)
The wired-in FM Modulator is one way to go. You plug it into your radio, find a power source and plug in your iPod. You have a switch that you'll need to locate somewhere handy that switches between the iPod and the radio input. Then you control your music via your iPod. It's basic, but functional....
Then there is the (now old) Harmon Kardon Drive + Play, which is a fully built-in system that sits on your dash and control it rather than the ipod, which is hidden away somewhere. I've used one of these and they are fantastic! Everything you'd need in the box.
Cheap one on eBay at the moment...
Then comes the Alpine version, the ex-10. This is very similar to the Harmon Kardon, but is sexier, full colour and has built-in Bluetooth as well, handy if you haven't already got it.
This is the one I'm currently using in my 156. Now this version doesn't come with the built-in FM antenna attachment like the Harmon Kardon one, but I just happen to have that part available if you decided to go down that route (just give me a PM)
Fairly cheap on eBay...
I hope that helps you out, and if there is anything you're not sure on just ask, as I've got experience with all three of these suggestions.