you can get the iPod kits that connect to the OEM stereo but they're not really that good and they're quite pricey too. You were looking into getting a new stereo I believe, you said your mate had one for sale? You'll have to check if it has iPod connectivity, or an AUX port, perhaps a 3.5mm jack at the back of the stereo but these are usually at the front.
You can pick the iPod stereos up cheap enough (<£100) which have the proper iPod connector (the long thin one which plugs into the iPod) which will plug into either the CD changer port in the back of the stereo or USB & composite (either will do, it will come supplied with some headunits, if not the cable's about £30 max)
These will let you control your iPod through the stereo and charge them at the same time.. I've got one on my stereo and it's really handy, especially when driving as you don't have to fiddle about with the iPod. Make sure the one you're looking at supports your iPod as some of the older ones don't support iPod touch or iPhone.