I have an iTrip for my (now my wife's) 1st gen Nano. It worked okay; the sound quality was of course not the same as a hard wired or even a cassette adapter, but it worked. Main problem with it was the way it was secured to the Nano. When cradled in it did present a sleek if thicker package, and I used two way velcro to secure the iTrip to my dash and then I could just pop in/pop out the Nano when getting in and out of the car. However on some of the bumpier roads if I hit a large bump at speed often it would kick the Nano out of the connector just enough to invoke the pause-on-headphone-removal thus stopping the music after hitting the bump. I'd have to push it back down and hit play while driving, which was...adventurous.
Also it depended on where in the car it was as far as reception quality (hence why I secured it to a place on the dash that was both accessible and gave decent reception.) One fun effect is when in traffic, I would occassionally find myself bumper to bumper near someone ELSE who had their own transmitter, and so during those times my iTrip would duke it out with their iTrip (or whatever they had.) Since it was difficult to get away from said car when in traffic, I'd have to sit there and either deal with static or have to listen to whatever music THEIR iPod was pumping out since it wasn't the easiest thing to search for another station and then set the iTrip to transmit on that station while simultaneously drive the car in traffic. This happened more often than I thought it would.
Oh, and the battery life wasn't all that great, since the iTrip got it's power from the iPod battery so the drain was high. I could have gotten a charging cord to connect to the bottom of it, but it didn't come with one and I didn't want to risk getting the wrong cable and frying my Nano or iTrip.
I've since gotten a 5G 30Gig iPod and have been somewhat reluctant to get another iTrip for it for these reasons.