Hmmm...

Well, try the hyperterm capture on the pausing. I am wondering if you are using a docking station or connecting to a serial port. Perhaps your player thinks it is seeing commands... Do you actually see the pause icon, or just the music stops? Does the song counter advance, or move to the next song if left for a while?

As for car glitches, when you have these drops does the audio resume where it left off, or is there a time difference (as though the song was playing for the appropriate period of time, but you could not hear it)?

Do you see this on all of your players, or just one? Are all of your players in sync?