I use a Farenheit FM Modulator, which is a little box appx 3" long. It goes between the head unit and the FM antenna, and I've got it mounted under the dash. The iPod plugs into that, via a cable that comes up to my ashtray, which I've modified so the iPod will fit. I can choose among six different FM frequencies. Installation is easy since the head unit is so accessible on the older 911.
So basically this is the "wired" equivalent of the FM transmitters. But it works well. Probably because the iPod signal is being piped directly to the FM input, while the FM antenna has been blocked off. In theory, the FM part of the head unit has a limited frequency range compared to the CD part, but in my 911 I am quite sure it doesn't matter.
bell turned me on to this (thanks!). You can get the FM modulator from Crutchfields.
http://www.crutchfield.com/S-8fH2plohvpk/cgi-bin/ProdView.asp?g=234550&I=026EFM01&search=fm+modulator