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I got a similar quote (parts and labor) from the dealer when I was buying my car. Apparently, the installation does take a bit of tech time. I just made sure to have them throw it in before I signed the paperwork for the car.
Oh, and for anyone considering this, by default they were going to put the cable in the glove compartment, but I asked if it could go in the center console and they did that instead.
As far as navigating the OEM interface, it does allow you to browse playlists, so I make a couple playlists specifically for the car and update them in iTunes every now and then. If you have a ton of music on your iPod, the interface does make it tough to select a certain album or track.
