You're right, using the iPod instead of a changer is a better value for the same amount of money, but I see two reasons that would keep me from doing this.

First of all, I don't know anything about the iPods music format, but I have been told that you can't just download any mp3 and put it on there. I'm probably wrong, and even if I am right, I'm sure you can hack it, but its something to look into, which I'm sure you have.

Second, a plain single disc MP3 deck can be had for around $150-200.
I don't listen to enough music to justify having 3,000 songs for a total of $625 vs
140 songs for $150 when I have enough time at work to just burn a disc on my way out the door, but thats just me. If you can justify spending the cash, I think the ipod is the way to go, especially if you can control it from the head unit, thats the only way I would do it.

One question though-where does the ipod mount?