Right now there is no iDrive integration with the iPod, so yes you would need to look at the iPod to click through music (or use something like the AirClick remote control). One thing I can recommend, however, is creating playlists ahead of time. This is a common practice so you probably already know this, but since you asked about keeping track of songs...
On my 40 GB Archos Gmini MP3 player, I have tons of albums but rarely would I want to listen to an entire album. So I have different playlists of songs I know I want to listen to in my car, to suit different "moods". That minimizes the need for me to skip to the next song, look through dozens of albums, etc. because I've already pre-selected the music. This is really why you wouldn't need a CD changer, or even have to create a single MP3 CD. Your playlists are like CDs, and choosing a different playlist is like changing a CD. Get it?
