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I hated the FM transmitter I had (a while ago now mind). Sound quality was crap and sometimes finding an empty frequency to tune into was a PITA. It might be a fair bit of work, but hardwiring is definitely the way to go.
I had an iTrip and it was sound. Used to stick my iPod in the dash recess above the stereo and never got any interference. Well worth the £8 or whatever it was that I paid for it.