what head unit model are you using? and are you using the KCA-420i?
My head unit is a year old. It is the CDA 9875 I think. It is the older version of the 9887. The headunit I bought from crutchfield and installed myself. The ipod adapter is a wire that comes out the back of the stereo and goes through my glovebox , although now I have the wire out of box so I can pick up calls. The wire connects to the dock connector at the bottom of the phone/ipod. The whole thing, iPhone hookup and head unit, cost 349. However any alpine stereo that is alpine ready should work. There are cheaper headunits available. I see the IDA x001 is really nice and is 399. It has a color screen that shows album art.
So what I noticed is that when i plug the iPhone in, I get a msg asking if I want to turn on airplane mode. I say no. It has the same charging screen as when it is hooked up at home. When a call comes in the stereo pauses the track and you can pick up the phone. When it is done the track resumes. Also important, the alpine unit knows audio vs video tracks and ignores the video tracks. That is important. All mix works as does playlists, artist, song, and album sorting through the headset. Going to the ipod functions on the iPhone brings up a screen that says the iPhone is attached to an accesory, so you cannot control the ipod from the iPhone unit itself. The sound quality is good, as good as my ipod was. If you do not use the iPhone for ipod functions and disconnect the iPhone from the headunit and then reconnect it, the stereo will pick up from exactly where it left off. This is a nice feature. Operating the iPhone in ipod mode between connections will reset the connection so that it will play from track one on your iPhone. NOt sure if that makes sense.
Overall this is very cool and hope you have success if you decide to purchase an alpine headunit. I have had this alpine for over a year now and I have to say I have not had SINGLE problem with it...