This is what happens when web designers mod their iPod into their car: G35iPod. Actually the site documents (very prettily as you can see) two mods, the original FM transmitter mod and then a later hardwire.
If you're interested in hacking your MP3 player, iPodlounge has a whole forum devoted to MP3 players in the car. It's an excellent starting point, even if you're aren't using an iPod. [Via Engadget]