Yeah, I'd say at least double the size of your collection is a good rule of thumb. To me, the primary appeal of an MP3 player is to be able to take my entire collection with me. Sounds like you might have something like Ford's Sync system (with a username like V6Pony, I'm guessing you're driving a Mustang). So, no worries about trying to manipulate a touchscreen while driving. I'd say you're on the right track.
I've had aftermarket iPod Integration solutions from DICE and USASPEC in my last 4 cars and that's where my iPod lives nearly full-time. It's nice to have a "radio station" that only plays the music I like. I keep it on shuffle all the time.
My solution was a 30GB iPod Classic. More recently, I upgraded to a 16GB iPod Nano (the previous generation) and couldn't be happier with it. I also have an iPod Touch, but I mostly surf and play games on that device. Across the iPod line-up, the audio quality is consistently excellent. Apple doesn't skimp on the audio components of the iPod. You can't go wrong with any of their models.