My observations of the new update are:
1. It actually works with my 160GB iPod classic now. It has about 51,000 songs on it. It does take about 20 minutes for the radio to query the iPod to finally allow the browse button to work. If I unplug the iPod for whatever reason and plug it back in, I have to wait the full 20 minutes or so to see the browse button etc. Very frustrating. There is small bursts of "please wait" while navigating the iPod.
2. The songs playing from the iPod will annoyingly fade out/ cut off at the end of the song. This is a huge problem for continuous albums or live albums. Also similarly, there is no gapless playback settings anywhere.
3. The back arrow (up one level) goes away when you are listening to songs. It is there when browsing for albums. This is annoying because you must find your place where you were to listen to another album by the same artist.
4. Not related to the update but the album name must be accurately named in your id3 tags or else the album art will not show up. It cannot be named for instance "The Wall Disc 2" You must edit the tags so that a double album appears as one big album. The "disc 2" will negate the album art. It appears that the Gracenote database does not contain every album like you think it would, even if you have it spelled correctly.
5. The audio quality is beyond better when using an iPod vs the SD card. I used the exact same mp3 files and I have the 8.4 model with the advanced 9 speaker/Alpine setup. It goes louder too. It also is louder when the noise/ car speed compensation adjustment is on max. On a side note, even though louder, today's music is engineered/recorded hot with overblown, high amplitude and no dynamic range. Compare an album to a classic rock one from the 70's. You'll see what I mean.
Maybe there is some hidden engineering menu that might unlock some features like the older Mygig units, or it will be fixed in future firmware updates. Unfortunately that can take months or years unless someone involved is actually reading these forums.