it would be better to have the mic inside the car, then have the empeg subtract it's output audio from the mic input signal

This would be tricky to do correctly and there would need to be a lot of work done in the software to accomplish it. It would have account for things like L/R delay, EQ, mic placement, etc. It's not a simple X-Y operation in the software, it's a lot of work. By making the assumption that the mic isn't hearing the music, you simplify the software.

Not that it really matters right now whether the software is simple or complicated. No one has stepped up to actually claim the project yet.