1) Yes, the ashtray cover does close when the iPod is removed.
2) Yes, this works with the DICE - just choose DICE as your interface cable and you are set. If you send the iPod cable that comes with the DICE back to us, we can credit you $20 off the DICE to make it sting a bit less.
E-mail me and I'll send you instructions on that.
3) No dremeling or modification of the ashtray is required. There's already a hole through which the cable passes, so it's very simple in terms of wiring. Send me an e-mail and I'll reply with the spec.dock instructions.
Let me know if you have any more questions!