First off - do not, and I repeat - DO NOT - try to interface your iPod to the stereo system using a frequency modulation (FM) transmittor. The sound quality is vastly inferior to a wired solution.
Here's the options, as I see them:
1. Install the BMW Aux input kit. Since you have a 2001, this is probably not a viable opton, as you would have to replace your radio module. (note: it can be done, as I know from personal experience having replaced mine in order to have this capability). However, if you have Aux then you can pipe the audio from any source, including an iPod, into the radio system with excellent sound quality. You get steering wheel controls to adjust the volume, but that's it. All other control functions must be performed from the device (ie. iPod) itself.
2. Install an aftermarket Aux input, such as Blitzsafe or Soundgate. Same basic functionality as (1).
3. Install BMW's iPodYourBMW kit. Lots of info on this on the main page. Again, this option will not work with a 2001, however.
4. Install Dension's Ice->Link Plus unit. A good write-up at
http://www.xoutpost.com/icelinkplus.htm
5. Check into this new iPod adaptor -
http://www.crutchfield.com/ISEO-rgbt...0&I=581PA10BMW
There may be other alternatives, but those are the immediate ones that come to mind. My vote would be for option 4 at this point.
Jeff