Tony, right, that make sense and it is possible, as far as I can tell. But I think it is unlikely that that is the case, since if I let external units to poke into the iPod digital data, why not have them just read the mp3 bitstream directly. But it is possible.
However, I am guessing that would still be good, in terms of audio quality, as the uncompressed data strema would still be then processed by the headunit, and it would be the headunit to generate the analog audio signal.

I am really concerned that it is NOT the ipod to generate the analog signal. It would make the quality of the headunit so irrelevant, and that would be a pity!