I was on a quest similar to yours a few weeks ago, except I was looking for MP3 support with something OTHER than iPod. Not a huge fan of iPod's. Anyway, I wasn't trying to spend a lot of money to get the setup I wanted.
I just wanted to be able to use my iRiver MP3 player with my head unit. I bought the Kenwood DPX 701. This is the unit that has the USB port on the front. It works great if you have a thumb drive or a small iPod like a nano. It doesn't have enough power to run an external drive, and it wouldn't recognize my iRiver.
So, I bought an Alpine IVA-W200, which was way more than I wanted to spend, but damn it's cool... I quickly realized that I was STILL in the same boat I was with the Kenwood, because Alpine hasn't released their USB module that was due out in April of this year. If I owned an iPod, I could cheaply buy a module that would accomodate it, but now I'm thinking bigger.
mp3car.com has a kit that allows you to run any ATA/IDE drive, so I'm thinking Terrabyte...

This will only be possible if the head unit will see this kind of volume. I'm still researching, because I have this feeling that 999 is my unlucky number.
But if you're an iPod owner... ALPINE all the way!