Disclaimer: This instruction worked for me, there's no guarantee it will work in your car the same way. If you follow this instruction of modifying your car, you will do it at YOUR OWN RISK.
Since the earlier AM Radios didn't come with AUX-In, IPOD or USB integration, don't have easiy replacable DIN Radio and even more use MOST for communication between the decentralized components, the task of integrating an Ipod becomes somewhat challenging.
To my knowledge there are currently (mid 2012) only two vendors that offer adapter units. I decided to install an Icelink Gateway 500 MOST (GW51MO2; not the lite version). Unfortunately the instructions don't mention how to install in an AM, but you find some informations by the retailers and also on the Gateway homepage that you should follow installation scheme 2a and are to use the Volvo XC90 settings for the DIP switches.
To make the long story short: It works, but there are several stumbling blocks to overcome. It also took me several hours the first time. With this experience the next installation would only take about 1h if the cables of the car's wiring harness were long enough... But let's go through it step by step:
First remove the center console. A very good instruction can be found in this video, but it doesn't tell you the whole story.
So as described remove the saddle by hand or by utilizing a prying(?) tool. It'fixed only by two fir trees on its front. Once removed, remove the screw at the back of the armrest. Push back and slightly lift at the front while this time puling to the front. Armrest comes off.
Now remove the two visible screws at the back of the horizontal center console. Now lift at the back end. This didn't come off easy for me as the part was jammed approximately at ashtray level. When lifted at the back side, pull back the whole assembly and unplug all the electrical connections starting with the ash tray power outlet. All connectors are coded, so no need to worry.
Next remove the fascia with the SatNavunit. This is somewhat tricky since the screen is connected to the bod while the cover is connected to the fascia and both are clipped together at the top left and right of the screen. You have to unclip while removing the fascia. The fascia itself is also just clipped to the body. You can start either at the front center speaker or at the head unit. Use the tool for that!
Next lift hte fascia at the rear end as much as possible and unplug the connectors from the P R N D and start button. If just the cables were 5 cm longer!
Once removed, you can begin to unmount the radio portion of the center console. Unscrew the four obvious screws (two on top, two on the bottom and try to pull out the part. It could be so easy, if..... the cables were some cm longer. Especially the two connectors of the head unit (one MOST and one electrical) were that short, that it caused a lot of headache and scratches on my hands, as well. It's a little easier, if you also uncsrew the two screws in the vicintiy of the two aforementioned top screws. Those screws hold the bluetooth /carphone unit. Once this unit is loose, it gives a little more way for the cables so you can access the plugs more easily (while easily still is exaggerated).
Once done and after tons of sweat you're not yet done. The CD changer needs to come out as well. Uncrew the two torx screws and pull heavily. When the CDC comes off there is one connector at the back that needs to be unplugged. Would be easier if... (no need to tell you again).
According to the Installation booklet of the Gateway 500, the module is installedbetween the CDC and the Headunit. Since the sound system in the AM comprises many modules and you don't know exactly how they are connected, i first tried to unplug the MOST connector from the headunit, plug it into the Dension, then connect the Dension to the headunit. This did NOT work. The right way is to unplug the Connector from the CDC unit, connect the optical cables to the Dension and then connect the Dension to the CDC. Since the CDC connector comes as combined connector (electrical and optical) you can not simply use this connector right away. You have to unclip the inner optical connector from the outer connector. Pay attention for the very small tongue that releases the clip.
Separate the optical from the electrical cables. They are taped together. Remove the tape till the branch of the optical cables (approx. after 15-20 cm). It's a bit tideous since the cables run between two housing elements. If tape is removed, pull back the optical cable only. Insert the optical cable's end into one of the fitting spare connectors provided by Dension. Also attach the coupling (also provided) and the conectors labled car side.
Next is to reconnect the CDC to MOST again: Use the cable labled CDC side. Fiddle it in between the above mentioned housing elements in parallel to the electrical wire. Then plug into the CDC plug and plug that plug into the CDC. Since the optical wire is a little short, reassemble the CDC in to place.
The two optical connectors (labled CDC and Car side) now needs to be placed: there's a wide slot between the construction elements and the right footwell trim, that easily accepts the two cables from above. They reappearat lower center console level again approximately 10 cm in front of thesear adjustment switches. Pull back the carpet in the right footwell and push the optical cables to the front of the footwell. Make sure you don't pull out the conector that eventually will plug into the head unit too much.
Now also shoot the electrical cabling for the Dension: coming from the ashtray location, have the cable also pass between trim and carpet approximately where the optical wires run. Then continue to the footwell. Now it's time to connect to power: use "power thieves" to connect to ignition plus and ground. Have a look at the cables for the three or four switches at the rear of the center console. I used the "Sport" switch cables (colour coded to follow). Don't use the ashtray outlet connectors since they are not switched by ignition; they are permanent thus your Dension will always be powerd draining your battery when not in use!
Before you can connect the Dension, you need to put the head unit back into place. Plug in power cable and optical connectors first, then reconnect all the other switches. Don't forget to refix the bluetooth module before sliding the head unit console back into place. Make sure all the cables go back in smoothly and you don't squeeze anything. You probably want to try whether everything works, but it won't until the PRND and start buttons are not connected. So connect them also. Now wire up the Dension: Set the DIP switches first, then plug in the optical cables, the power plug, the RCA connector and switch as well as the iPod connector and probably your iPod, too.
Set the switch to CDC and set your key to ignition pos. II. Switch on the radio. Everything should work as usual. Switch off again and set the the mode switch to iPod, then turn ignition to II again. When changing from FM to CD on the center console and selecting CD1 through 6 you should see some formerly unknown text on the screen. When in iPod UI mode (which is rather likely), you should be able to play some music already while using the iPods controls and hear it through the car's speakers. Track + and - will also work, but you might not yet get the artists, album etc. text displayed. Don't worry.
So everything should work by now and you can reasemble your car in the reverse order.
Hide the Dension in the right footwell between side carpet and center console tunnel. There are some cables and a lot of insulation mateial, too. No need to really fix it in place there. Hide the mode switch cable, USB cable (if used) and iPod cables behind the carpets. I use to put the mode switch near the innermost rail of the right seat just below the carpet. It hides there perfectly. The iPod connector will probably be ending in a modified center console compartment (another project to follow). USB is not used currently, but if, it probably will have the connector mounted near the tire fit for USB sticks or a hard drive will be connected directly to the Dension and hidden in the same place.
When i first used the Dension i was rather disappointed since no Artist or Album information were displayed. This is how it can be done: Choose CD6, scroll down to "iPod GW" and press FF (next track) on the center console for about 5 seconds. This now really selects this mode. Just having iPod GW displayed doesn't mean that this mode is really selected. That was a misassumption i earlier made. Now you should be able to get the additional info displayed. Unfortunately the text scrolls slowly from right to left with some additional standard text (need to look it up) upfront. So when scrolling through the list of Artists, Albums or Playlists, it takes a while until you can read the essential information. No realy good fast selection, unfortunately, but fully functional, though.