Direct install will have less clutter, you can hide the iPod if you want, steering wheel controls, cleaner audio signal.
Currently I have my iPhone hooked up through the Griffen AutoPilot which charges the iPhone, gets the audio directly from the dock connector, and has controls for FFW, FFR, and play/ stop. Works pretty nice and it is one connection to the iPod, you still use the iPod to access the artists, albums, etc. But it takes up the aux port & lighter & it's not as clean & clutter free as a direct iPod connect.
i just use my mp3 player in mine, i bought a long cord to plug in to the port ran it under the console up behind radio and drilled a small whole in the side of the little storage compartment in front of the driver and poked the other end into the box and leave mine in there and when needed there is enough cord to pull it out towards me to adjust then just let the slack fall back in the void area under the box, works fine for me.. my 02