I got the idea from this site http://www.kawal.net/auxinput.htm, followed the alternative 2 route and bought the same switched jack, cut and connected the wires from the XM module. Now, when i want to listen to the iphone, i just plug the 3.5mm jack and select XM from the radio. If you subscribed (i'm not) and want to listen to XM just unplug the 3.5mm jack and it will automatically switch to XM input.
If you don't want the hassle of building your own, check to see if you can order the complete harness from him.
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