no luck accessing the iPod connection when cycling through "modes" on the stereo? should take you through (radio) --> (trunk CD changer) --> (in-dash single CD). iPod connection might be a fourth choice or have replaced the trunk CD changer.
you're getting the error message on your phone because the old iPod connection kit won't charge a USB device. a couple years ago, Apple switched standards from FireWire to USB charging, meaning older accessories can't send power to newer iOS devices. compatibility in terms of the ability to pass audio through shouldn't have been affected, but depends on the accessory. if you can cycle through "modes" and get the audio to pass through, all you would need is
one of these to enable charging.