I agree, it sounds like a new head unit would be a good start, then maybe a speaker upgrade.
You'll find that there are a lot of good head units designed to not only connect to, but fully operate your iPod for the $200-300 price range you would consider.
Go to
www.cartoys.com and/or
www.crutchfield.com and you find all kinds of information. Alpine even makes a head unit that doesn't have a CD in it anymore and only uses the radio or iPod.
Dave S.