I just tried this in my car. And now the Belkin Auto Kit for iPod works with the iPhone. Before the update the Belkin Auto Kit for iPod would only charge the iPhone and no sound would come out when playing in ipod mode.
Now you still get the message that says "This device is not designed to work with iPhone. Would you like to switch to Airplane mode." Just click No and and go to ipod mode play some music and it will output the sound through the dock connector just like the ipod.
Ahhh now I can listen to my iPhone in the car just like I used to with my iPod.