What's my best option...to upgrade..or not

Hey folks, I'm looking for some input on what direction I should go with the audio in my car.

First, my current system consists on the 'upgraded' (HK) system and OEM CD player. I discovered the previous owner had the Icelink iPod adaptor installed, more on that in a second.

Second, I'm not a picky person when it comes to sound. In fact, I think the HK system sounds pretty good. I know I'll get responses telling me how much the HK system sucks. But it's just fine for my listening standards. I don't need (or want) a lot of bass. And the mid/highs are clear...to me.

My problem is two-fold.
1. Some of the pixels on the OEM head unit have started to get cranky. In cold weather they won't display until they're warm. I'm sure this is a known problem with not many solutions, except a new head unit.
2. When I bought the car, the iPod integration worked fine. So I didn't mess with it. Recently, it stopped working and the display simply read Icelink>Plus. I have no idea what that means, but it doesn't play my iPod anymore.

So now you know my dilemma, here are my requirements.
1. iPod control. I have a 5th gen iPod video and an iPhone 4. Both need to be able to play music. Video would be awesome, but not required.
2. Pandora would be a very nice option. Direct control would be bonus. Just being able to play it would be eons better than what I'm stuck with now.
3. Bluetooth, I see little point in upgrading if I can't get this.

Optional, nice-to-haves-
1. Video
2. USB - more audio options can't hurt
3. Satellite radio
4. Navigation

Onto my thoughts.
Option 1.
I'd love love to keep the OEM head unit as I like the clean lines and integration with the rest of the dashboard. I realize the dead pixel issue might get worse or the display might die althogther, which would render the unit useless.
What options, if any, are there to fix the display or replace the head unit with a fully working one...which might eventually have the same display issue?
If I did this, I'd need another iPod/iPhone adaptor. Assuming my Icelink is dead. The only unit I've found that fits my requirements (iPod/bluetooth/sat radio/USB) is the Dice MediaBridge. The cons are Dice's suspect issues with integration to newer iPods/iPhones. Review are less than stellar.

Option 2.
Replace factory head unit with single DIN media device. I've had good luck with Pioneer, so I'm looking at this MVH-P7300. Also, the Kenwood KIV-BT901 has good reviews. Both of these units meet all my requirements and even a couple of the optional ones. I give up the OEM look, but the euro center dash kit does help to make things a little less conspicuous.
My problem with replacing the head unit is the HK system. As I understand, the output from the OEM head unit is matched to the HK amp. So, using an aftermarket head unit required adaptors, such as the PAC SOEM-4. Which has received awful reviews. And I'll need this (Axxess ASWC) to retain my steering wheel controls.
I really think this is my best option, but the lack of competent options for hooking up the HK system makes me hesitant.

Options 3.
Replace factory head unit with double-DIN. Something like the Dynavin would destroy all comers. But that would require a pretty big bank account...and I'd have to move my HVAC controls to the lower storage bin. But it would allow me to retain the OEM dash look. Still, $1000 +/- is way more than I need to spend on A/V in my car. My house....is another story...lol

Thanks for your input!

If you can live with a few missing pixels leave it in and take a chance with the Dice or look at Grom units. I think they have Bluetooth etc as well.

If you get any aftermarket HU I would seriously consider upgrading the speakers as you'll no longer have a way to interface the deck to the stock amp.

The problem with E46s is that any upgrade becomes an all or nothing affair. You want to upgrade spkrs you need separate amp(s) and custom work. Want a deck, need to upgrade spkrs too. Need a sub, fortunately that is the easiest of upgrades. Unfortunately it highlights how shitty the front stage is.

You definately don't need upgraded speakers to put an aftermarket hu in... I have the jvc kdr-720 and it sounds awesome with the stock speakers, and the orange colors on the hu match the stock interior lights really well. It was recommended to me by crutchfield rep.