Wow, really good time to get an M3 I guess, I just got mine Friday, and if I'm counting correctly that makes 7 people this weekend that just got M3's!! Dang!
AT any rate I THINK the iPOD just plugs right into it. I'm using a Nexus S, and I'm able to play my music thru the audio system with no adapter whatsoever. It just plays the audio over Bluetooth. It's really nice, not having to have an extra cable to dangle out of the console.
Not sure if iPod's have bluetooth these days, but if you plug it into that interface in the console you should be able to see you playlists and stuff on iDrive. Good luck!