A music playing app should be able to work with or without extra hardware. I don't think anything we've thought up would preclude such an app from approval.

A third-party music playing app would use (to start) the music stored on the iOS device itself. It would provide a better UI than the built-in music player app and could do so in a couple of modes, depending on the usage scenario. Hand-held (normal) mode and in-car mode are two pretty basic choices.

I believe someone already has hardware out or coming out that allows you to access external storage. There are a number of ways to attack this, from directly connected USB dongle to WiFI (I'm not sure if BT is possible given what's availabe in the BT stack in iOS). That would provide the secondary source of music where the app would manage its own database.

I wouldn't be ready to commit financially if I didn't see an opportunity for healthy return just with a new third party music player that could only play music already on the iOS device. The other stuff is a bonus and any hardware is a great markup opportunity.

Oh, and to tell you the truth, I'd kind of hope for a rejection at some point. It could make for a nice PR piece which can really build momentum for an app. There are a number of examples in the app store that would not be anywhere near as successful as they are now were it not for the PR generated by initial or update rejections. I think it's pretty obvious at this time what does and doesn't get you rejected from the store.

I'll come back and delete this comment and its Google cache should I ever find myself in a situation where I have an app about to be rejected.