You should have your iPod volume turned up 3/4 of the way with a FM transmitter. If it still isnt loud enough try transmitting over another station instead.
*DO NOT turn the iPod volume all the way up. Aside from it distorting the music, its bad for the iPod.
*
And there is no way to avoid the hiss or background noise with a FM transmitter since you are basically broadcasting some thing overtop of something else.
One solution, that is if you are willing to spend the money, is to get a new deck in your car that has a pre-out for a male-to-male standard headphone jack cord to go from your iPod to the deck. This would allow you to play your music through your speakers without the background noise.
