I will only answer the things I am confident in answering. If you're paying $589, you can expect much more out an an aftermarket stereo (with XM, too). I'd go that route.

As for the FM modulator, I believe one of the main selling points for XM is the sound quality, which I feel is better than FM. To my mind, running an XM broadcast through an FM modulator is like buying a DVD, recording it onto a VHS tape, and then only watching the tape.