I've got this and run my 4th gen nano through it. It will run any ipod iirc, the iPhone is a tight fit and I think you might get interference aswell (from it finding signal) which is why i don't use my iphone.
It works as the 6 cd changer, press cd twice to get the six "discs" showing. It then will have the 1st five playlists from your ipod loaded as disc 1 - 5 and then the 6th disc is 99 random songs from your ipod. Also it will only play 99 songs from each playlist it has loaded on discs 1 - 5 as this is the limit.
Hope this helps