You're right-- that is the older ICE Link... The current hardware for BMW is ICE Link Plus. Version 1 wasn't upgradeable, and I believe Version 1.1 is similar to Plus (where you can mix and match a cradle or butt-plug, but may not have the ability to display info on the screen.) BTW, the BMW firmware is what is now V2, but I don't think it will work on the 1.1 hardware...
Edit: This review talks about the differences:
http://www.motoringfile.com/2004/11/...ice62link_plus
If you're willing to go to $350... I'd say go with a new ICE Link and find a used iPod.
I haven't used a phatbox -- price is just too high. But I've had my ICE Link for 6 weeks now and its great. The newest firmware has BMW on-screen display as an option (default is off), but once its on, its great -- buttons 1-5 select the first 5 playlists, and button 6 brings up a menu where you can search for a specific artist, other playlists, etc. RND button puts it in shuffle mode, etc.
As far as where to put it, you could put it in the sunglass cubby above the ashtray -- Dension sells a butt-plug as an alternative to the cradle. You could hook up the iPod, and close the door and it wouldn't be seen. Or you could get the Euro center console that replaces the cupholders and put it in there...