I'll bring this back to the top. We have 3 resident experts in that area; Tomm, Ody and Mbai. Maybe they will see it this time an post an input. The subject has come up before. I'm electronically illiterate.
The FAQ shows how to hack into the factory XM harness (if you have it) to install an AUX interface. Other than that, a wired (not wireless) FM modulator is the only answer. My XM Commander came with one. It plugs inline with your antenna. When it gets a signal input, it shuts down your antenna and injects a hardwired FM modulated signal into the radio. For me the sound was just as good as a regular FM radio station with zero static or distortion. The downside is that you won't get metadata (song titles, artist, etc) on the head unit. For now, I don't know of any way to get that, short of doing a carputer install like MBAI2. That's not for the faint of heart.
Yea, if you don't want to do any heavy wiring changes to the radio, the easiest way is to just go with an FM modulator. If you have XM, you can do what Ody suggested. Someone on this forum (drawing a blank on the name) did it and said that he was very pleased with the results.
Rumor has it that a company is working on an interface for the Nav+XM head unit that will let you control the iPOD using the headunit. Song info will be displayed on the screen of the Nav as well. Unfortunately, there's no word on such an interface for the non-navs.
If your current or future radio improvement plans include amps and speakers, you may want to take a look at the JL Audio Clean Sweep. Long story short, it re-levels and cleans up the signal coming from your head unit to provide a better signal going into your aftermarket amps. It also has an auxillary audio input perfect for something like an ipod. Good luck.