Nothing horrible, in fact, overall the iPhone integration in the IV NAV/JBL system is pretty good through USB. A couple of annoyances: 1 - why on earth do they disable the ability to hold down the scroll key to move rapidly through lists when the car is moving. Most irritating. 2 - the whole automatically starting to play the item you stop scrolling on is asinine. I'd love to have a chat with the designer who spec'd that. Has anyone found it to be a bit unstable in terms of connecting to the phone? i.e. most times it works great, other times the USB tab lights up and you can select it, but it doesn't show any content and craps out when you hit menu. Pretty solid stereo though. LOUD anyway.
Apple didn't to a great job of making iPhone a car-friendly device. I've used iPhone with a Pioneer and a JVC deck in my other cars, and it's far from perfect. The very biggest flaw? Why does it play music through the connector, yet you can't talk on the phone via the connector? After all, a wired connection is 100x better than a wireless connection. If you could just run a mic and be done with it, the integration with car audio would be vastly better. With my Pioneer deck, by the way, the iPhone plays music every time you attach it to the deck. There is no way to not make it auto-play. If you're using the phone and you realize you need to plug the phone in to charge its battery, you will remain on the call, but the Pioneer will switch to iPod mode and start playing music. Another issue: The iPhone 3G needs a 1 amp power supply in order to charge while operating as a phone. Otherwise, you will find that if you talk on the phone for half an hour, its battery will be depleted, even though it is charging. Most USB and cigarette lighter chargers supply only 0.5 amp (500 mAmps, look for yourself). If you look at the little white power charger that comes with the iPhone, you'll see that it supplies 1 amp. So the best bet is to use a 1 amp charger with Bluetooth, and copy your music to a USB thumb drive.
I have an old iPod sitting around I can just use, if it comes to that. For my own part, I own a two week-old Prius II, and I'm here gathering info for my upcoming mega-audio/video/gps upgrade.
I have an old iPod too, but it's stuck in my M3 which has such a crappy iPod integration system that it can't even play music from the iPhone...:-( As I said, earlier, despite a couple of irritations, the Prius USB system is really pretty good.
I have the first gen iPhone. I don't have nav on my Prius, but my other car is a TSX w/ Tech Package. I'll never use the iPhone to play music again, it's just not designed to function that way. USB flash drives all the way
I've found that my iPhone 3G (no S) connects flawlessly via BT, but of course you can't use the iPod feature through the USB connection at all. When I plug in the iPhone via USB it says 'this accessory is not compatible' or something. It will recharge the battery, however. The doc that came with the car says the iPhone is not supported, so that's fine. What's not fine is that the iPod touch doesn't work via USB either. Same message. I can use an old iPod classic (gen V) via USB, but it is kind of awkward. It's as if the Prius' brain can't deal with all the content on the 60GB iPod. Playing any of them through Aux works just fine.