I don't have one in my boat, but I do have one in my car. AUX inputs will have the best quality, followed by a tape deck adapter. FM transmitters typically have less quality than tape deck adapters, but a good one can still sound good. FYI, if you want an FM transmitter, get one that plugs into a 12v outlet. This grounds the signal and will allow it to produce a cleaner FM signal for better quality. I own this one, and it works fine for me. http://www.newegg.com/Product/Product.asp?Item=N82E16855996601
Also, if you're worried about it getting a little wet, get a good case for it. I have the iSkin Evo3. You can find one on amazon.com (check what size ipod they are for). It's not waterproof or anything, but it covers the entire face of the ipod, leaving only the headphone jack exposed. It has a flap for the bottom expansion port. So for the most part, a little spray shouldn't do any harm. I have a 5g ipod video by the way.
If you want a true waterproof housing, check out otterbox.com. I believe they are waterproof to 1 meter.
Hope this helped a little bit.
(Message edited by ar1stotle on December 09, 2006)