Getting album art onto a USB stick is a little trickier than an iPod but, as xenon says, certainly do-able.
There is a touch more functionality if using an iPod, such as the ability to create playlists and better searching capabilities.
If you are considering buying a new iPod, then I believe that the latest generation Nano and Touch will produce slightly crisper artwork images. I bought a latest gen iPod Classic a few weeks ago purely to live in my new car and whilst the artwok displayed on the i-drive screen is undoubtedly a bit grainy, I'm happy to offset this by the fact that I've got all the tunes I will ever need thanks to the huge storage size of the Classic.
Before shelling out for a new iPod, you could try a USB stick and see if it meets your needs (all for a significantly lower sum).
Just to add (in case you're not aware already) you've also got the option of copying around 10-12GB of music files to the hard drive in the car, either by importing from USB or ripping CD's. The functionality though is a little more restricted, i.e. the way tracks are sorted, limited search functions etc.
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