To the OP - define what sounding 'awful' means to you, as well as describe your 'special cable'.

Otherwise all of us are guessing at what might be wrong.

There are no defined rules of how loud you should set your iPhone/iPod - because there are no defined rules as to what the input specs are on the car's audio input. My iPhone 4s and now my older 'beater' iPhone 4 sounds primo at full volume. Some other portable devices (example Nook Color) need the headphone volume at full as it's the only setting where they haven't used a quantization of the audio signal (turning the volume down on the Nook is pure digital, no actual control of the analog volume).

Now, my Sansa mp3 player on the other hand has way too much output at full volume for the input on the very same radio input, and like Pat suggests, it has to be turned down or it distorts the input stage.

As for playing off of USB drives, this is becoming nearly standard on any aftermarket radios - even those you can buy at Wal-Mart. $100 will get that capability.

However, step back and think a little more about how you want to listen to music, because a Sansa Clip has a MicroSD card slot that you can load up with gigs of songs and you can go immediately from car to car-park to park to home to wherever, with just about the same convenience - if you eventually get a car radio with a USB port, then you can attach the Sansa Clip just like it's a 'pen drive' to the radio; most will see it as simply an attached storage device just like a 'pen drive'.

There's a reason the Sansa mp3 players are still around - they are one of the only legitimate alternatives to the iPod/Phone iOS devices and give users windows explorer simplicity of use.