My iPhone 4 is a great music player with seemingly great sound quality. I have pretty good speakers in my Jeep (Alpine S's in the speakerbar, Kenwoods in the dash) and the sound quality is always better when it's sourced from my iPhone as opposed to my Sony Xplod headunit. I also have an iPhone mount on my dash, which makes it really easy to use it for music as well as navigation (MotionX) and hands-free calls. I can just play my playlist and it automatically fades the music down when I get a call or when MotionX wants to tell me where to go. The mount also makes it exceedingly easy to record video of what is going on in front of me if I ever wanted to.
When I do get a call, I don't even have to pull the phone out of the mount to take the call; calls go through my stereo system and I can make it as loud as I want, which is really handy when you're on the interstate with the top and doors off and it's hard to hear. I'm sure other smartphones offer similar driving experiences.
I know it's an expensive device but it really is the best MP3 player I've ever had. Not just because of the interface (which is easy to use while driving) or the sound quality, but because of everything else I can do with this device besides listening to music. Smartphones really are the ultimate travel companion device.