I just kicked this over to Street/Performance - Mod Tech is usually more for things like powertrain and/or suspension mods, and light chassis mods (the heavier chassis mods go into AdFab...)
As far as your original question:
- An "mp3" rating on a headunit merely means that it can read CDA (CD Audio)
and mp3 formatted tracks. This generally carries the assumption that it can also read "burned" CDs - not necessarily CR-RW discs (although this one apparently can, according to the info page at Crutchfield:
http://www.crutchfield.com/p_158CDXMP40/Sony-CDX-MP40.html?search=CDXMP40&tp=5684)
- An AUX input is listed as "Optional" for that model - if you have one, it will resemble a small headphone jack (as previously stated,) and will likely be in a lower corner. This unit does
not have a USB jack, nor a memory card slot.
However, I think the best advice you've been given is pretty much what I'd give you - get a headunit with AUX and/or USB front-panel inputs, and swap. I don't know much about iPot interfacing (to be perfectly honest, I'm sick of even hearing about the wretched things, and I've been using Creative .mp3 players for as long as I've been using .mp3 players - I think they're built better...) but I'm inclined to think that the standard USB socket should work for interfacing to the iPod. Failing that, just look for one that lists itself as being "iPod capable," and you'll probably also be able to use the USB jack for thumb drives anyhow (which is what I'd prefer to do - but I've got a whole stack of thumb drives floating around here already. A front panel memory card slot - SD or Memory Stick - would also be useful to me, I use both card formats extensively.)
There really aren't a whole lot of options for you to connect - the easiest one (least work) being to get a decent RF transmitter and simply plug that into the earphone jack on your iPod. You can then keep the iPod somewhere handy while you're listening to it.
Since you don't have the USB plug on the headunit, you can
not plug it in using the "docking cable." (NB: If you had a USB jack on the front, that would also allow you to simply put .mp3 files onto a "thumb drive" and plug that in directly - since most headunits with USB jacks and .mp3 capability can function as .mp3 players, if you provide the data.)
I didn't see where it could read a DVD (I've seen .mp3 capable headunits that can read DVD discs - and I'm thinking about one for my next replacement. That lets me stick something like a week's worth of tunes on one disc...) but the ability to read CD-RW discs is already a potential advantage (since you can created mixdiscs - then scrap and remix them later without burning through new media.)
That link I gave you to the Crutchfield information page should be accurate - I've been dealing with Crutchfield for years, and can count the mistakes they've made on the fingers of one nose. Their pricing is also quite good - so I'd probably start looking for a replacement headunit there.