You are talking about a car audio system that's iPhone ready. I installed one of those in my wife's car and the technician warned me specifically it wouldn't work past a certain update version (as in the operating system of the stereo wouldn't recognize the iPhone any more).
So, two quick solutions, write an email to the support department of the car system manufacturer. Ask them if they have a system update that is compatible with your iPad version.
The other solution (and by far the simpler) get an FM radio transmitter. Those things are sold in gas stations for around 20-30$ (i bought one from a gas station in Arkansas but I don't remember how much it cost). There are transmitters that plug to the iPad connection slot and powers up off the iPad itself (i like those). There are the ones that plug to the 12v supply and charge up the iPad while transmitting (i don't really like cables lying around and I'm a bit too much in love with my iPad to risk charging it with a device that might screw up the battery but hey they do the trick) and then there are the ones that plug to your 3.5 jack just like head phones and work on batteries ( I LOVE those, you can play anything from any device and best of all, they have their own batteries).
And downgrading IS possible with some versions. I wouldn't know because I haven't updated my iPad in well over a year but at some point I downgraded my 3GS and it worked. Google it.