You could do the armrest mod but a cheaper alternative is the genuine "wire in the glovebox" iPod kit - 1K0 000 504 or something like that. They're available new for about £50-150 on eBay.
You won't lose the built in 6CD function, you'll just need to hit CD twice to select the other device.
The genuine one is a bit crap (its essentially a Dension Ice>link Plus), it crashes occasionally and doesn't show track names, but it does the job for me.