I got an xcarlink for Christmas off of the folks (handy hint dropping started around October time)
You can't really do anything with the steering wheel controls other than skip track up or down.
What you can do, is set a playlist or album playing on the iPod before you set off and use the skip track feature to flip forwards or backwards.
I've got a 160Gb iPod Classic in there at the moment and it's working great!
I couldn't recommend the xcarlink enough. Granted, there is no display on the car other than "CDC 1-01" (and "EXTENSION" on my EX Sat Nav Screen), but the iPod is in the centre console, so I can look at that if I need to
NB - obviously when stationary of course
Fitting it was easier than I thought. In fact, I'm considering offering my services (for a small fee, of course) for fitting xcarlinks to Civinfo members in the North West (and West Yorkshire, when it fits in with visiting the inlaws!)
PM for details