Best car stereo for iphone?

Right now the iPhone does not support playing music through Bluetooth. That may change with the new firmware update, but no one really knows for sure until Apple announces it.

I've had great success with at least part of your upgrade. I recently swapped the factory unit in my 2002 Maxima for an Alpine CDA-9886 (see it at Crutchfield here: http://www.crutchfield.com/S-ZlndVGj5lcT/App/Product/Item/Main.aspx?i=500CDA9886). It included a cable that connects my iPhone (directly from the dock connector) to the stereo where it can be selected as one of the inputs. You can then search and select music from your iPod/iPhone directly from the controls on the head unit. The unit also displays the current song information (Artist, title, etc.) while playing from the iPod.

My iPhone advises me that the accessory I'm attaching to is not made for the iPhone and asks if I want to turn on Airplane mode - which I never do. The cable that comes with the Alpine must be very well shielded as I've never heard any GSM noise from my phone while connected to this unit. When a call comes in, the iPhone fades and pauses the music while you take the call. As soon as you end the call, the iPhone goes back to play mode. It seems to work very well.

I didn't buy it, but this Alpine unit also has a Bluetooth add-on module available that allows you to handle calls via the controls on the unit. That would seem to allow (almost) hands-free operation.

I'm sure there are other options out there, but this one works well for me.

not sure if anyone can say what the "best" stereo is, but there should be plenty out there to fit your needs. with what you've said, you'd want to find a stereo with USB or ipod connectivity (which in most cases means the same thing). thats probably most important, in order to play the iphone's ipod through. the other component would obviously be bluetooth telephone capabilities of the stereo, so you can make and receive calls through the unit.

This is the one i got, the Pioneer FHP-8000bt
http://www.crutchfield.com/App/Product/Item/Main.aspx?search=fhp+8000&i=130P8000 BT
This even let me "download" my contacts to the unit. so i could dial straight from the stereo.

if you stick to brands such as Alpine, Pioneer and Eclipse, you most likely wont go wrong. crutchfield is a very good online retailer to look at as well. i didnt purchase from this place, but i hear its very good as well: http://www.sonicelectronix.com/