iPhone also works the the Dice Electronics iPod/car interface kit!
http://www.diceelectronics.com/ipod_integration.htm
I installed one in my BMW 330i and it works fantastic. This plays an iPod through the stock stereo head unit with track forward/back controls (on radio or steering wheel), displays the track/artist text on the radio display, and powers/charges the iPod - all through the dock connector.
The only difference so far using the iPhone is that it turns it into sort of an iPod-only mode whereby no other functions are available... not that you should be using anything but the phone portion while driving anyways but I haven't received any calls while having it attached this way yet.
The audio connection I have always believed to be digital or at least shielded extremely well b/c the 5G iPod 30GB I've been using for the past year or so is always crystal clear. The iPhone sounded the same as the iPod and just as good in both airplane mode and normal mode.
Once I test receiving a call with it this way (if it is indeed possible to do so) I will post info.