They're great. Some on here will push you to go for another brand of mp3 player. I'd push you to get an iPod.
Including the software part of the package, it's the easiest to use. The sound quality is great.
There's the normal iPod and iPod nano. The nano is just a smaller version, but can't play videos and doesn't store as much music as the regular iPod. Perhaps goto a shop and have a play with them to see which you prefer. The nano may well suit your needs, and is cheaper.
As for the car system, you have many options. You might be able to get a special install system for your car, but this could be pricey. Or if you have a tape player you can use one of those tape adapters with it. Or you can buy FM transmitters for the iPod that turns your iPod into a small radio station so you can tune any radio into what your iPod is playing. The latter is illegal in the UK (it's like a pirate radio station), but I won't tell them if you don't ;) (also, it's very hard for them to find you, because it's got such a short transmitter range anyway).