I know you're getting lots and lots of advice. I'm just going to add my two cents.
I bought this a week ago for my 3GS. While it's not the most sterdy thing on the face of the planet, it does a great job of FM transmission. Much clearer than any cassette player then I have ever tried. You don't get the sound of a tape playing either.
It holds the iPhone ok. There is some movement on really sharp turns, but that is it.
I don't use the extra headphone jack to play calls over the stereo. It's just overkill and doesn't sound as good as the normal speaker.
Take a look. For the price, I don't think you'll find much better.