You might find someone with an answer at the Volvo forum called "Swedespeed". A lot of young techy types trying to push the window on things like this.
quick answer to this,
you can buy cassettes with headphone plugs attached to plug in any mp3 player, get one of these, insert into your tape deck, plug in your iphone and there you go.
the other common option is an iphone/ipod FM transmitter - which transmits your music via FM radio waves and you tune your radio to the frequency. although these are not as good sound quality as the tape.