The iPod allows me to listen to any of my favorite thousands of songs. In addition I have subscribed to Audible.com which for $20/month allows me to download 2 books per month to the iPod. I'll tell you, driving long distances goes too quick when listening to a good book. The readers of these unabridged books are way better readers than I am. I often get to my destination wishing I still had farther to go. I listen to iPod music while in town. With the sunroof and rear window open I still use the in-the-ear Sony earphones. Little wind noise, lots of fresh air, and great music.
iPod v. XM? Well it depends on what you consider most important. I know what I like, and own it already - music wise. I don't want to wait for any radio station to get around to what I want to hear.
Yes, it is a little bother to hide the iPod when I am out of the 4Runner. But it is a quick hide in the center storage.