I just saw a hack on HackADay about how to put an input jack in your car to hook up your MP3 player. Don't get me wrong, since I think the hack works well for the purpose it is meant to serve, but when you have a car you don't want to deface too much you can't do a switch like that. Luckily there are other ways to automatically cut off the CD audio without having to flip a switch. A simple panel mount jack (Part number 274-246 if the link to Radio Shock doesn't work) will do the trick and will look as professional as you can get.
Of course, the reason why you'd want to do this is because FM transmitters and cassette adapters suck no matter how high quality they are and anyone trying to get high quality audio in their car from their MP3 player will need to tap directly into the audio signals. The ONLY drawback that I have seen to this so far is that when my CD changer is changing CDs, I lose my audio. That's only about 7-8 seconds, and I also think if I put a blank CD or a scratched up CD in one of the changer slots, I may even be able to overcome this problem.
This procedure should work for any car, granted you know which specific wires from the CD changer to splice. What you are basically doing is interrupting the audio wires coming from a CD changer to the tape deck and inserting your MP3 player in the middle. The panel mount jack does just that. When you insert the plug into the jack it interrupts the CD changer signal and sends its own signal to the tape deck. The hardest part of the whole thing was figuring out what wires from the CD player were the three carrying the ground, left, and right signals. In order to do that I actually had to split apart the stereo and look on the circuit board, which usually documents the signals on all connectors. If you have an E36 BMW with a stock stereo, I'll save you time and tell you what wires you actually need to splice.
Pictures are not complete on this page, since posting the howto on the web was an afterthough and I actually ripped open stuff to take the pictures, but they should convey the idea.
The first part is finding a suitable spot to install the jack. In my case, the console towards the front of the car was the place of choice. Notice that the red light installed on the same piece is totally unrelated to this project. That was for my self-installed alarm.

Don't forget the thickness of the panel where you are installing the jack. The tip of the jack does not have a lot of room, so if you're installing the jack on a thick panel you may have to shave behind the panel so that the jack will fit. In my case it barely fit.

Next is the wiring for the connector. Here are two pictures showing the jack without a plug and with a plug:


If you notice, when the plug is inserted a couple of the contacts are pushed away. The contacts that touch the plug when the plug is inserted (1, 2, and 5) are the ones that need to go to the tape deck or radio. The other contacts (3 and 4, in addition to 5 to do this correctly) need to go to the CD changer. The common ground (5) can be connected via one wire to the ground (And the ground wire between the CD changer and the tape deck does not need be spliced, but it would be good practice to treat it like the other wires and splice that as well.
For the wire I used a three conductor shielded cable from Radio Smack. Do make sure that it is shielded to minimize interference from other sources. Once you get a jack from Radio Jock you should be able to see the connectors on the back and see where you need to connect the wires. Tip: (Ha ha, literally) the tip on the plug is the left channel.
The BMW E36 Specific Portion: Now here comes the tricky part, the part for which I don't have any pictures, because I wasn't about to open up my splice behind the tape deck. In order to splice the CD changer wire (Which is the six conductor connector behind the tape deck below the main connector) you'll need to be very careful and first splice the outer casing to expose the wires inside. Trust me. There's no way to tap into the connector. I destroyed my connector and barely put it together trying to tap into it. Once you expose the wires, single out the following wires and splice them: (BIG surprise) (I would have kicked my own ass for this) Red=Right, White=Left, Black=Ground. What's funny about this is that I could have just spliced the wire and figured out which wires to use without spliting open the tape deck since these three colors are the super standard colors for this type of connection in all stereo equipment. The red from the tape deck goes to the tip connector (1), the white connector from the tape deck goes to the middle connector (2), and the black from the tape deck goes to the ground connector (5). The red from the CD changer side goes to the conductor the tip pin is connected to when the plug is not inserted (3) and the white connector from the cd changer side goes to the other one (4). Again the ground wire from the CD changer should go to 5 as well.
Let me know if you have any question, and email me pictures of your finished installation and I'll post them here.
Ross (Take out the dash and the dot from the email address) r-os.s@nvek.com