What gives the best soundquality?FM transmitter or cassette adapter?

The absolute best sound quality would be to purchase either a Apple dock or a 3rd party dock that has a line-out on it and hook that into your car stereo's auxiliary input. That way you get a true line-out in terms of audio quality and volume (in that adjusting the iPod's volume doesn't affect the output volume through the line-out).

If your car stereo doesn't have an auxiliary input, then your second best option would be to use a cassette adapter with a 3rd party charger with a built-in line-out. There are several adapters that you can purchase that have line-outputs on them. There is a Belkin model that I use, it has an adjustable audio output but, when turned all the way up, it has the same level as Apple's dock adapter line-output. There is also a Monster adapter which is also pretty good, the only drawback is that you may have to take your iPod out of its case in order to hook it up to the adapter. As everyone knows, it really isn't a good idea to take the iPod in and out of a case as that will only increase scratches.

You can also see the pictures in that Monster link I sent you, it shows the exact setup that you should have.

If possible, stick with the direct connection. I've used both Monster FM modulation and cassette and they work but not great. The cassette adapter relies on the quality of your cassette unit. In one of our vehicles the head is loosing one channel and frequently we only hear mono music. I have also used the dock, but imo it's easier to just use a quality cable to the main iPod connection where I don't have to remove my iSkin.

I have no aux in so I use cassette adapter. I considered getting FM transmitter but realized there is no benefit, only potential reduction in sound quality. Check your stereo manual - perhaps there are pins for extra line input on the rear of the stereo - ideally you could use this to hook up the player

I wouldn't use neither. I bought a cheap JVC kd-dv4202 car stereo that can play DVDs filled with 80 albums of lame -V5 mp3's (160 with dual layer if you want). No fiddling with external devices, and the DVD stays put in the player.

I've used a casette adapter. It's not great, but it sounds better than FM.

Does the JVC kd-dv4202 have a line input?'
And what about Panasonic CQ-D1703N which one is best?

No line input, but do you really need it when you have up to 90 albums available on each single layer DVD with lame -V5 mp3's? You can also burn on dual layer DVDs if you want even more without exchanging disc. My idea was actually to avoid the need for always bringing along the iPod, making sure it was charged, and the fiddling with plugging/unplugging it to the car player. (ps: you can buy a fairly expensive iPod adapter for the JVC which charges the iPod, and let you control it from the car player).

The panasonic is probably better: has a some more power, and supports DivX if you going to use it for video. Still the JVC is much cheaper, and plays my burnt mp3-DVDs without any hitches. Also disc loading time and navigation is quite fast.
(edit: spelling)

Line input,just incase..